Congressional Documents
                                  43 400                                 



                            105 th Congress                             



                             Rept.  105 108                             



                                                                            



                                                                             



                        HOUSE OF REPRESENTATIVES                        



                               1st Session                              



                                 Part 4                                 



                                                                        







            SECURITY AND FREEDOM THROUGH ENCRYPTION (``SAFE'') ACT OF 1997     







                                                                         



                September  16, 1997.--Ordered to be printed              



                                                                         



 Mr. Goss, from the Permanent Select Committee on Intelligence, submitted

                             the following                               

                               R E P O R T                               



                              together with                              



                             ADDITIONAL VIEWS                            



                         [To accompany H.R. 695]                         



       [Including cost estimate of the Congressional Budget Office]      





     The Permanent Select Committee on Intelligence, to whom was referred 

  the bill (H.R. 695) 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, having considered the same, report       

  favorably thereon with an amendment and recommend that the bill as      

  amended do pass.                                                        

   The amendment is as follows:                                           



     Strike out all after the enacting clause and insert in lieu thereof  

  the following:                                                          



          SECTION 1. SHORT TITLE; TABLE OF CONTENTS.                              



     (a) Short Title.--This Act may be cited as the ``Security and Freedom

  Through Encryption (`SAFE') Act of 1997''.                              

   (b)  Table of Contents.--The table of contents is as follows:          







      Sec. 1. Short title; table of contents.                                 



      Sec. 2. Statement of policy.                                            



                            TITLE I--DOMESTIC USES OF ENCRYPTION                  



      Sec. 101. Definitions.                                                  



      Sec. 102. Lawful use of encryption.                                     



            Sec. 103. Voluntary private sector participation in key management

      infrastructure.                                                         

      Sec. 104. Unlawful use of encryption.                                   



                              TITLE II--GOVERNMENT PROCUREMENT                    



      Sec. 201. Federal purchases of encryption products.                     



      Sec. 202. Encryption products purchased with Federal funds.             



      Sec. 203. Networks established with Federal funds.                      



      Sec. 204. Product labels.*COM003*                                       



      Sec. 205. No private mandate.                                           



      Sec. 206. Implementation.                                               



                              TITLE III--EXPORTS OF ENCRYPTION                    



      Sec. 301. Exports of encryption.                                        



      Sec. 302. License exception for certain encryption products.            



      Sec. 303. License exception for telecommunications products.            



      Sec. 304. Review for certain institutions.                              



      Sec. 305. Encryption industry and information security board.           



                              TITLE IV--LIABILITY LIMITATIONS                     



      Sec. 401. Compliance with court order.                                  



      Sec. 402. Compliance defense.                                           



      Sec. 403. Reasonable care defense.                                      



      Sec. 404. Good faith defense.                                           



      Sec. 405. Sovereign immunity.                                           



      Sec. 406. Civil action, generally.                                      



                             TITLE V--INTERNATIONAL AGREEMENTS                    



      Sec. 501. Sense of congress.                                            



      Sec. 502. Failure to negotiate.                                         



      Sec. 503. Report to congress.                                           



                             TITLE VI--MISCELLANEOUS PROVISIONS                   



      Sec. 601. Effect on law enforcement activities.                         



      Sec. 602. Interpretation.                                               



      Sec. 603. Severability.                                                 





          SEC. 2. STATEMENT OF POLICY.                                            



     It is the policy of the United States to protect public computer     

  networks through the use of strong encryption technology, to promote and

  improve the export of encryption products developed and manufactured in 

  the United States, and to preserve public safety and national security. 

           TITLE I--DOMESTIC USES OF ENCRYPTION                                    



          SEC. 101. DEFINITIONS.                                                  



   For purposes of this Act:                                              



       (1) Attorney for the government.--The term ``attorney for the       

   Government'' has the meaning given such term in Rule 54(c) of the       

   Federal Rules of Criminal Procedure, and also includes any duly         

   authorized attorney of a State who is authorized to prosecute criminal  

   offenses within such State.                                             

       (2) Certificate authority.--The term ``certificate authority'' means

   a person trusted by one or more persons to create and assign public key 

   certificates.                                                           

       (3) Communications.--The term ``communications'' means any wire     

   communications or electronic communications as those terms are defined  

   in paragraphs (1) and (12) of section 2510 of title 18, United States   

   Code.                                                                   

       (4) Court of competent jurisdiction.--The term ``court of competent 

   jurisdiction'' means any court of the United States organized under     

   Article III of the Constitution of the United States, the court         

   organized under the Foreign Intelligence Surveillance Act of 1978 (50   

   U.S.C. 1801 et seq.), or a court of general criminal jurisdiction of a  

   State authorized pursuant to the laws of such State to enter orders     

   authorizing searches and seizures.                                      

       (5) Data network service provider.--The term ``data network service 

   provider'' means a person offering any service to the general public    

   that provides the users thereof with the ability to transmit or receive 

   data, including communications.                                         

       (6) Decryption.--The term ``decryption'' means the retransformation 

   or unscrambling of encrypted data, including communications, to its     

   readable plaintext version. To ``decrypt'' data, including              

   communications, is to perform decryption.                               

       (7) Decryption information.--The term ``decryption information''    

   means information or technology that enables one to readily retransform 

   or unscramble encrypted data from its unreadable and incomprehensible   

   format to its readable plaintext version.                               

       (8) Electronic storage.--The term ``electronic storage'' has the    

   meaning given that term in section 2510(17) of title 18, United States  

   Code.                                                                   

       (9) Encryption.--The term ``encryption'' means the transformation or

   scrambling of data, including communications, from plaintext to an      

   unreadable or incomprehensible format, regardless of the technique      

   utilized for such transformation or scrambling and irrespective of the  

   medium in which such data, including communications, occur or can be    

   found, for the purposes of protecting the content of such data,         

   including communications. To ``encrypt'' data, including communications,

   is to perform encryption.                                               

       (10) Encryption product.--The term ``encryption product'' means any 

   software, technology, or mechanism, that can be used to encrypt or      

   decrypt, or has the capability of encrypting or decrypting any data,    

   including communications.                                               

       (11) Foreign availability.--The term ``foreign availability'' has   

   the meaning applied to foreign availability of encryption products      

   subject to controls under the Export Administration Regulations, as in  

   effect on September 1, 1997.                                            

       (12) Government.--The term ``Government'' means the Government of   

   the United States and any agency or instrumentality thereof, or the     

   government of any State.                                                

       (13) Investigative or law enforcement officer.--The term            

   ``investigative or law enforcement officer'' has the meaning given that 

   term in section 2510(7) of title 18, United States Code.                

       (14) Key recovery agent.--The term ``key recovery agent'' means a   

   person trusted by another person or persons to hold and maintain        

   sufficient decryption information to allow for the immediate decryption 

   of the encrypted data or communications of another person or persons for

   whom that information is held, and who holds and maintains that         

   information as a business or governmental practice, whether or not for  

   profit. The term ``key recovery agent'' includes any person who holds   

   his or her decryption information.                                      

       (15) National security.--The term ``national security'' means the   

   national defense, foreign relations, or economic interests of the United

   States.                                                                 

       (16) Plaintext.--The term ``plaintext'' means the readable or       

   comprehensible format of data, including communications, prior to its   

   being encrypted or after it has been decrypted.                         

       (17) Plainvoice.--The term ``plainvoice'' means communication       

   specific plaintext.                                                     

       (18) Secretary.--The term ``Secretary'' means the Secretary of      

   Commerce, unless otherwise specifically identified.                     

       (19) State.--The term ``State'' has the meaning given that term in  

   section 2510(3) of title 18, United States Code.                        

       (20) Telecommunications carrier.--The term ``telecommunications     

   carrier'' has the meaning given that term in section 102(8) of the      

   Communications Assistance for Law Enforcement Act (47 U.S.C. 1001(8)).  

       (21) Telecommunications system.--The term ``telecommunications      

   system'' means any equipment, technology, or related software used in   

   the movement, switching, interchange, transmission, reception, or       

   internal signaling of data, including communications over wire, fiber   

   optic, radio frequency, or other medium.                                

    (22)  United states person.--The term ``United States person'' means-- 



    (A) any citizen of the United States;                                  



    (B) any other person organized under the laws of any State; and        



       (C) any person organized under the laws of any foreign country who  

   is owned or controlled by individuals or persons described in           

   subparagraphs (A) and (B).                                              

          SEC. 102. LAWFUL USE OF ENCRYPTION.                                     



     Except as otherwise provided by this Act or otherwise provided by    

  law, it shall be lawful for any person within any State and for any     

  United States person to use any encryption product, regardless of       

  encryption algorithm selected, encryption key length chosen, or         

  implementation technique or medium used.                                

                    SEC. 103. VOLUNTARY PRIVATE SECTOR PARTICIPATION IN KEY       

          MANAGEMENT INFRASTRUCTURE.                                              

     (a) Use is Voluntary.--The use of certificate authorities or key     

  recovery agents is voluntary.                                           

     (b) Regulations.--The Secretary shall promulgate regulations         

  establishing standards for creating key management infrastructures. Such

  regulations should--                                                    

       (1) allow for the voluntary participation by private persons and    

   non-Federal entities; and                                               

       (2) promote the development of certificate authorities and key      

   recovery agents.                                                        



     (c) Registration of Certificate Authorities and Key Recovery         

  Agents.--Certificate authorities and key recovery agents meeting the    

  standards established by the Secretary may be registered by the         

  Secretary if they so choose, and may identify themselves as meeting the 

  standards of the Secretary.                                             

          SEC. 104. UNLAWFUL USE OF ENCRYPTION.                                   



     (a) In General.--Part I of title 18, United States Code, is amended  

  by inserting after chapter 121 the following new chapter:               

                   ``CHAPTER 122--ENCRYPTED DATA, INCLUDING COMMUNICATIONS        





 ``Sec.                                                                  



      ``2801. Unlawful use of encryption in furtherance of a criminal act.    



      ``2802. Privacy protection.                                             



      ``2803. Unlawful sale of encryption.                                    



            ``2804. Encryption products manufactured and intended for use in  

      the United States.                                                      

      ``2805. Injunctive relief and proceedings.                              



      ``2806. Court order access to plaintext.                                



      ``2807. Notification procedures.                                        



      ``2808. Lawful use of plaintext or decryption information.              



      ``2809. Identification of decryption information.                       



      ``2810. Unlawful export of certain encryption products.                 



      ``2811. Definitions.                                                    





          ``2801. Unlawful use of encryption in furtherance of a criminal act     



     ``(a) Prohibited Acts.--Whoever knowingly uses encryption in         

  furtherance of the commission of a criminal offense for which the person

  may be prosecuted in a district court of the United States shall--      

       ``(1) in the case of a first offense under this section, be         

   imprisoned for not more than 5 years, or fined under this title, or     

   both; and                                                               

       ``(2) in the case of a second or subsequent offense under this      

   section, be imprisoned for not more than 10 years, or fined under this  

   title, or both.                                                         

     ``(b) Consecutive Sentence.--Notwithstanding any other provision of  

  law, the court shall not place on probation any person convicted of a   

  violation of this section, nor shall the term of imprisonment imposed   

  under this section run concurrently with any other term of imprisonment 

  imposed for the underlying criminal offense.                            

     ``(c) Probable Cause Not Constituted By Use of Encryption.--The use  

  of encryption alone shall not constitute probable cause to believe that 

  a crime is being or has been committed.                                 

          ``2802. Privacy protection                                              



     ``(a) In General.--It shall be unlawful for any person to            

  intentionally--                                                         

       ``(1) obtain or use decryption information without lawful authority 

   for the purpose of decrypting data, including communications;           

       ``(2) exceed lawful authority in decrypting data, including         

   communications;                                                         

       ``(3) break the encryption code of another person without lawful    

   authority for the purpose of violating the privacy or security of that  

   person or depriving that person of any property rights;                 

       ``(4) impersonate another person for the purpose of obtaining       

   decryption information of that person without lawful authority;         

       ``(5) facilitate or assist in the encryption of data, including     

   communications, knowing that such data, including communications, are to

   be used in furtherance of a crime; or                                   

       ``(6) disclose decryption information in violation of a provision of

   this chapter.                                                           

     ``(b) Criminal Penalty.--Whoever violates this section shall be      

  imprisoned for not more than 10 years, or fined under this title, or    

  both.                                                                   

          ``2803. Unlawful sale of encryption                                     



     ``Whoever, after January 31, 2000, sells in interstate or foreign    

  commerce any encryption product that does not include features or       

  functions permitting duly authorized persons immediate access to        

  plaintext or immediate decryption capabilities shall be imprisoned for  

  not more than 5 years, fined under this title, or both.                 

                    ``2804. Encryption products manufactured and intended for use 

          in the United States                                                    

     ``(a) Public Network Service Providers.--After January 31, 2000,     

  public network service providers offering encryption products or        

  encryption services shall ensure that such products or services enable  

  the immediate decryption or access to plaintext of the data, including  

  communications, encrypted by such products or services on the public    

  network upon receipt of a court order or warrant, pursuant to section   

  2806.                                                                   

     ``(b) Manufacturers, Distributors, and Importers.--After January 31, 

  2000, it shall be unlawful for any person to manufacture for            

  distribution, distribute, or import encryption products intended for    

  sale or use in the United States, unless that product--                 

       ``(1) includes features or functions that provide an immediate      

   access to plaintext capability, through any means, mechanism, or        

   technological method that--                                             

       ``(A) permits immediate decryption of the encrypted data, including 

   communications, upon the receipt of decryption information by an        

   authorized party in possession of a facially valid order issued by a    

   court of competent jurisdiction; and                                    

       ``(B) allows the decryption of encrypted data, including            

   communications, without the knowledge or cooperation of the person being

   investigated, subject to the requirements set forth in section 2806;    

       ``(2) can be used only on systems or networks that include features 

   or functions that provide an immediate access to plaintext capability,  

   through any means, mechanism, or technological method that--            

       ``(A) permits immediate decryption of the encrypted data, including 

   communications, upon the receipt of decryption information by an        

   authorized party in possession of a facially valid order issued by a    

   court of competent jurisdiction; and                                    

       ``(B) allows the decryption of encrypted data, including            

   communications, without the knowledge or cooperation of the person being

   investigated, subject to the requirements set forth in section 2806; or 

       ``(3) otherwise meets the technical requirements and functional     

   criteria promulgated by the Attorney General under subsection (c).      

   ``(c)  Attorney General Criteria.--                                    



       ``(1) Publication of requirements.--Within 180 days after the date  

   of the enactment of this chapter, the Attorney General shall publish in 

   the Federal Register technical requirements and functional criteria for 

   complying with the decryption requirements set forth in this section.   

       ``(2) Procedures for advisory opinions.--Within 180 days after the  

   date of the enactment of this chapter, the Attorney General shall       

   promulgate procedures by which data network service providers and       

   encryption product manufacturers, sellers, re-sellers, distributors, and

   importers may obtain advisory opinions as to whether an encryption      

   product intended for sale or use in the United States after January 31, 

   2000, meets the requirements of this section and the technical          

   requirements and functional criteria promulgated pursuant to paragraph  

   (1).                                                                    

       ``(3) Particular methodology not required.--Nothing in this chapter 

   or any other provision of law shall be construed as requiring the       

   implementation of any particular decryption methodology in order to     

   satisfy the requirements of subsections (a) and (b), or the technical   

   requirements and functional criteria required by the Attorney General   

   under paragraph (1).                                                    

     ``(d) Use of Prior Products Lawful.--After January 31, 2000, it shall

  not be unlawful to use any encryption product purchased or in use prior 

  to such date.                                                           

          ``2805. Injunctive relief and proceedings                               



     ``(a) Injunction.--Whenever it appears to the Secretary or the       

  Attorney General that any person is engaged in, or is about to engage   

  in, any act that constitutes, or would constitute, a violation of       

  section 2804, the Attorney General may initiate a civil action in a     

  district court of the United States to enjoin such violation. Upon the  

  filing of the complaint seeking injunctive relief by the Attorney       

  General, the court shall automatically issue a temporary restraining    

  order against the party being sued.                                     

     ``(b) Burden of Proof.--In a suit brought by the Attorney General    

  under subsection (a), the burden shall be upon the Government to        

  establish by a preponderance of the evidence that the encryption product

  involved does not comport with the requirements set forth by the        

  Attorney General pursuant to section 2804 providing for immediate access

  to plaintext by Federal, State, or local authorities.                   

     ``(c) Closing of Proceedings.--(1) Upon motion of the party against  

  whom injunction is being sought--                                       

       ``(A) any or all of the proceedings under this section shall be     

   closed to the public; and                                               

       ``(B) public disclosure of the proceedings shall be treated as      

   contempt of court.                                                      

     ``(2) Upon a written finding by the court that public disclosure of  

  information relevant to the prosecution of the injunction or relevant to

  a determination of the                                                  



                    factual or legal issues raised in the case would cause        

          irreparable or financial harm to the party against whom the suit is     

          brought, or would otherwise disclose proprietary information of any     

          party to the case, all proceedings shall be closed to members of the    

          public, except the parties to the suit, and all transcripts, motions,   

          and orders shall be placed under seal to protect their disclosure to the

          general public.                                                         

     ``(d) Advisory Opinion as Defense.--It is an absolute defense to a   

  suit under this subsection that the party against whom suit is brought  

  obtained an advisory opinion from the Attorney General pursuant to      

  section 2804(c) and that the product at issue in the suit comports in   

  every aspect with the requirements announced in such advisory opinion.  

     ``(e) Basis for Permanent Injunction.--The court shall issue a       

  permanent injunction against the distribution of, and any future        

  manufacture of, the encryption product at issue in the suit filed under 

  subsection (a) if the court finds by a preponderance of the evidence    

  that the product does not meet the requirements set forth by the        

  Attorney General pursuant to section 2804 providing for immediate access

  to plaintext by Federal, State, or local authorities.                   

     ``(f) Appeals.--Either party may appeal, to the appellate court with 

  jurisdiction of the case, any adverse ruling by the district court      

  entered pursuant to this section. For the purposes of appeal, the       

  parties shall be governed by the Federal Rules of Appellate Procedure,  

  except that the Government shall file its notice of appeal not later    

  than 30 days after the entry of the final order on the docket of the    

  district court. The appeal of such matter shall be considered on an     

  expedited basis and resolved as soon as practicable.                    

          ``2806. Court order access to plaintext                                 



     ``(a) Court Order.--(1) A court of competent jurisdiction shall issue

  an order, ex parte, granting an investigative or law enforcement officer

  immediate access to the plaintext of encrypted data, including          

  communications, or requiring any person in possession of decryption     

  information to provide such information to a duly authorized            

  investigative or law enforcement officer--                              

    ``(A) upon the application by an attorney for the Government that--    



       ``(i) is made under oath or affirmation by the attorney for the     

   Government; and                                                         

       ``(ii) provides a factual basis establishing the relevance that the 

   plaintext or decryption information being sought has to a law           

   enforcement or foreign counterintelligence investigation then being     

   conducted pursuant to lawful authorities; and                           

       ``(B) if the court finds, in writing, that the plaintext or         

   decryption information being sought is relevant to an ongoing lawful law

   enforcement or foreign counterintelligence investigation and the        

   investigative or law enforcement officer is entitled to such plaintext  

   or decryption information.                                              

     ``(2) The order issued by the court under this section shall be      

  placed under seal, except that a copy may be made available to the      

  investigative or law enforcement officer authorized to obtain access to 

  the plaintext of the encrypted information, or authorized to obtain the 

  decryption information sought in the application. Such order shall also 

  be made available to the person responsible for providing the plaintext 

  or the decryption information, pursuant to such order, to the           

  investigative or law enforcement officer.                               

     ``(3) Disclosure of an application made, or order issued, under this 

  section, is not authorized, except as may otherwise be specifically     

  permitted by this section or another order of the court.                

     ``(b) Other Orders.--An attorney for the Government may make         

  application to a district court of the United States for an order under 

  subsection (a), upon a request from a foreign country pursuant to a     

  Mutual Legal Assistance Treaty with such country that is in effect at   

  the time of the request from such country.                              

     ``(c) Record of Access Required.--(1) There shall be created an      

  electronic record, or similar type record, of each instance in which an 

  investigative or law enforcement officer, pursuant to an order under    

  this section, gains access to the plaintext of otherwise encrypted      

  information, or is provided decryption information, without the         

  knowledge or consent of the owner of the data, including communications,

  who is the user of the encryption product involved.                     

     ``(2) The court issuing the order under this section shall require   

  that the electronic or similar type of record described in paragraph (1)

  is maintained in a place and a manner that is not within the custody or 

  control of an investigative or law enforcement officer gaining the      

  access or provided the decryption information. The record shall be      

  tendered to the court, upon notice from the court.                      

     ``(3) The court receiving such electronic or similar type of record  

  described in paragraph (1) shall make the original and a certified copy 

  of the record available to the attorney for the Government making       

  application under this section, and to the attorney for, or directly to,

  the owner of the data, including communications, who is the user of the 

  encryption product.                                                     

     ``(d) Authority To Intercept Communications Not Increased.--Nothing  

  in this chapter shall be construed to enlarge or modify the             

  circumstances or procedures under which a Government entity is entitled 

  to intercept or obtain oral, wire, or electronic communications or      

  information.                                                            

     ``(e) Construction.--This chapter shall be strictly construed to     

  apply only to a Government entity's ability to decrypt data, including  

  communications, for which it has previously obtained lawful authority to

  intercept or obtain pursuant to other lawful authorities that would     

  otherwise remain encrypted.                                             

          ``2807. Notification procedures                                         



     ``(a) In General.--Within a reasonable time, but not later than 90   

  days after the filing of an application for an order under section 2806 

  which is granted, the court shall cause to be served, on the persons    

  named in the order or the application, and such other parties whose     

  decryption information or whose plaintext has been provided to an       

  investigative or law enforcement officer pursuant to this chapter as the

  court may determine that is in the interest of justice, an inventory    

  which shall include notice of--                                         

    ``(1) the fact of the entry of the order or the application;           



       ``(2) the date of the entry of the application and issuance of the  

   order; and                                                              

       ``(3) the fact that the person's decryption information or plaintext

   data, including communications, have been provided or accessed by an    

   investigative or law enforcement officer.                               

    The court, upon the filing of a motion, may make available to that    

  person or that person's counsel, for inspection, such portions of the   

  plaintext, applications, and orders as the court determines to be in the

  interest of justice. On an ex parte showing of good cause to a court of 

  competent jurisdiction, the serving of the inventory required by this   

  subsection may be postponed.                                            

     ``(b) Admission Into Evidence.--The contents of any encrypted        

  information that has been obtained pursuant to this chapter or evidence 

  derived therefrom shall not be received in evidence or otherwise        

  disclosed in any trial, hearing, or other proceeding in a Federal or    

  State court unless each party, not less than 10 days before the trial,  

  hearing, or proceeding, has been furnished with a copy of the order, and

  accompanying application, under which the decryption or access to       

  plaintext was authorized or approved. This 10-day period may be waived  

  by the court if the court finds that it was not possible to furnish the 

  party with the information described in the preceding sentence within 10

  days before the trial, hearing, or proceeding and that the party will   

  not be prejudiced by the delay in receiving such information.           

     ``(c) Contempt.--Any violation of the provisions of this section may 

  be punished by the court as a contempt thereof.                         

     ``(d) Motion To Suppress.--Any aggrieved person in any trial,        

  hearing, or proceeding in or before any court, department, officer,     

  agency, regulatory body, or other authority of the United States or a   

  State may move to suppress the contents of any decrypted data, including

  communications, obtained pursuant to this chapter, or evidence derived  

  therefrom, on the grounds that--                                        

    ``(1) the plaintext was unlawfully decrypted or accessed;              



       ``(2) the order of authorization or approval under which it was     

   decrypted or accessed is insufficient on its face; or                   

       ``(3) the decryption was not made in conformity with the order of   

   authorization or approval.                                              

    Such motion shall be made before the trial, hearing, or proceeding    

  unless there was no opportunity to make such motion, or the person was  

  not aware of the grounds of the motion. If the motion is granted, the   

  plaintext of the decrypted data, including communications, or evidence  

  derived therefrom, shall be treated as having been obtained in violation

  of this chapter. The court, upon the filing of such motion by the       

  aggrieved person, may make available to the aggrieved person or that    

  person's counsel for inspection such portions of the decrypted          

  plaintext, or evidence derived therefrom, as the court determines to be 

  in the interests of justice.                                            

     ``(e) Appeal by United States.--In addition to any other right to    

  appeal, the United States shall have the right to appeal from an order  

  granting a motion to suppress made under subsection (d), or the denial  

  of an application for an order under section 2806, if the United States 

  attorney certifies to the court or other official granting such motion  

  or denying such application that the appeal is not taken for purposes of

  delay. Such appeal shall be taken within 30 days after the date the     

  order was entered on the docket and shall be diligently prosecuted.     



     ``(f) Civil Action for Violation.--Except as otherwise provided in   

  this chapter, any person described in subsection (g) may in a civil     

  action recover from the United States Government the actual damages     

  suffered by the person as a result of a violation described in that     

  subsection, reasonable attorney's fees, and other litigation costs      

  reasonably incurred in prosecuting such claim.                          

     ``(g) Covered Persons.--Subsection (f) applies to any person whose   

  decryption information--                                                

       ``(1) is knowingly obtained without lawful authority by an          

   investigative or law enforcement officer;                               

       ``(2) is obtained by an investigative or law enforcement officer    

   with lawful authority and is knowingly used or disclosed by such officer

   unlawfully; or                                                          

       ``(3) is obtained by an investigative or law enforcement officer    

   with lawful authority and whose decryption information is unlawfully    

   used to disclose the plaintext of the data, including communications.   

     ``(h) Limitation.--A civil action under subsection (f) shall be      

  commenced not later than 2 years after the date on which the unlawful   

  action took place, or 2 years after the date on which the claimant first

  discovers the violation, whichever is later.                            

     ``(i) Exclusive Remedies.--The remedies and sanctions described in   

  this chapter with respect to the decryption of data, including          

  communications, are the only judicial remedies and sanctions for        

  violations of this chapter involving such decryptions, other than       

  violations based on the deprivation of any rights, privileges, or       

  immunities secured by the Constitution.                                 

     ``(j) Technical Assistance by Providers.--A provider of encryption   

  technology or network service that has received an order issued by a    

  court pursuant to this chapter shall provide to the investigative or law

  enforcement officer concerned such technical assistance as is necessary 

  to execute the order. Such provider may, however, move the court to     

  modify or quash the order on the ground that its assistance with respect

  to the decryption or access to plaintext cannot be performed in a timely

  or reasonable fashion. The court, upon notice to the Government, shall  

  decide such motion expeditiously.                                       

     ``(k) Reports to Congress.--In May of each year, the Attorney        

  General, or an Assistant Attorney General specifically designated by the

  Attorney General, shall report in writing to Congress on the number of  

  applications made and orders entered authorizing Federal, State, and    

  local law enforcement access to decryption information for the purposes 

  of reading the plaintext of otherwise encrypted data, including         

  communications, pursuant to this chapter. Such reports shall be         

  submitted to the Committees on the Judiciary of the House of            

  Representatives and of the Senate, and to the Permanent Select Committee

  on Intelligence for the House of Representatives and the Select         

  Committee on Intelligence for the Senate.                               

          ``2808. Lawful use of plaintext or decryption information               



   ``(a)  Authorized Use of Decryption Information.--                     



       ``(1) Criminal investigations.--An investigative or law enforcement 

   officer to whom plaintext or decryption information is provided may use 

   such plaintext or decryption information for the purposes of conducting 

   a lawful criminal investigation or foreign counterintelligence          

   investigation, and for the purposes of preparing for and prosecuting any

   criminal violation of law.                                              

       ``(2) Civil redress.--Any plaintext or decryption information       

   provided under this chapter to an investigative or law enforcement      

   officer may not be disclosed, except by court order, to any other person

   for use in a civil proceeding that is unrelated to a criminal           

   investigation and prosecution for which the plaintext or decryption     

   information is authorized under paragraph (1). Such order shall only    

   issue upon a showing by the party seeking disclosure that there is no   

   alternative means of obtaining the plaintext, or decryption information,

   being sought and the court also finds that the interests of justice     

   would not be served by nondisclosure.                                   

     ``(b) Limitation.--An investigative or law enforcement officer may   

  not use decryption information obtained under this chapter to determine 

  the plaintext of any data, including communications, unless it has      

  obtained lawful authority to obtain such data, including communications,

  under other lawful authorities.                                         

     ``(c) Return of Decryption Information.--An attorney for the         

  Government shall, upon the issuance of an order of a court of competent 

  jurisdiction--                                                          

       ``(1)(A) return any decryption information to the person responsible

   for providing it to an investigative or law enforcement officer pursuant

   to this chapter; or                                                     

       ``(B) destroy such decryption information, if the court finds that  

   the interests of justice or public safety require that such decryption  

   information should not be returned to the provider; and                 

       ``(2) within 10 days after execution of the court's order to destroy

   the decryption information--                                            

       ``(A) certify to the court that the decryption information has      

   either been returned or destroyed consistent with the court's order; and

       ``(B) notify the provider of the decryption information of the      

   destruction of such information.                                        

     ``(d) Other Disclosure of Decryption Information.--Except as         

  otherwise provided in section 2806, a key recovery agent may not        

  disclose decryption information stored with the key recovery agent by a 

  person unless the disclosure is--                                       

    ``(1) to the person, or an authorized agent thereof;                   



       ``(2) with the consent of the person, including pursuant to a       

   contract entered into with the person;                                  

       ``(3) pursuant to a court order upon a showing of compelling need   

   for the information that cannot be accommodated by any other means if-- 

       ``(A) the person who supplied the information is given reasonable   

   notice, by the person seeking the disclosure, of the court proceeding   

   relevant to the issuance of the court order; and                        

       ``(B) the person who supplied the information is afforded the       

   opportunity to appear in the court proceeding and contest the claim of  

   the person seeking the disclosure;                                      

       ``(4) pursuant to a determination by a court of competent           

   jurisdiction that another person is lawfully entitled to hold such      

   decryption information, including determinations arising from legal     

   proceedings associated with the incapacity, death, or dissolution of any

   person; or                                                              

       ``(5) otherwise permitted by a provision of this chapter or         

   otherwise permitted by law.                                             

          ``2809. Identification of decryption information                        



     ``(a) Identification.--To avoid inadvertent disclosure, any person   

  who provides decryption information to an investigative or law          

  enforcement officer pursuant to this chapter shall specifically identify

  that part of the material provided that discloses decryption information

  as such.                                                                

     ``(b) Responsibility of Investigative or Law Enforcement             

  Officer.--The investigative or law enforcement officer receiving any    

  decryption information under this chapter shall maintain such           

  information in facilities and in a method so as to reasonably assure    

  that inadvertent disclosure does not occur.                             

          ``2810. Unlawful export of certain encryption products                  



     ``Whoever, after January 31, 2000, knowingly exports an encryption   

  product that does not include features or functions providing duly      

  authorized persons immediate access to plaintext or immediate decryption

  capabilities, as required under law, shall be imprisoned for not more   

  than 5 years, fined under this title, or both.                          

          ``2811. Definitions                                                     



     ``The definitions set forth in section 101 of the Security and       

  Freedom through Encryption (`SAFE') Act of 1997 shall apply to this     

  chapter.''.                                                             

     (b) Conforming Amendment.--The table of chapters for part I of title 

  18, United States Code, is amended by inserting after the item relating 

  to chapter 121 the following new item:                                  





         ``122. Encrypted data, including communications                        



        2801''.                                                                





           TITLE II--GOVERNMENT PROCUREMENT                                        



          SEC. 201. FEDERAL PURCHASES OF ENCRYPTION PRODUCTS.                     



     After January 1, 1999, any encryption product or service purchased or

  otherwise procured by the United States Government to provide the       

  security service of data confidentiality for a Federal computer system  

  shall include a technique enabling immediate decryption by an authorized

  party without the knowledge or cooperation of the person using such     

  encryption products or services.                                        

          SEC. 202. ENCRYPTION PRODUCTS PURCHASED WITH FEDERAL FUNDS.             



     After January 1, 1999, any encryption product or service purchased   

  directly with Federal funds to provide the security service of data     

  confidentiality shall include a technique enabling immediate decryption 

  by an authorized party without the knowledge or cooperation of the      

  person using such encryption product or service unless the Secretary,   

  with the concurrence of the Attorney General, determines implementing   

  this requirement would not promote the purposes of this Act.            



          SEC. 203. NETWORKS ESTABLISHED WITH FEDERAL FUNDS.                      



     After January 1, 1999, any communications network established with   

  the use of Federal funds shall use encryption products which include    

  techniques enabling immediate decryption by an authorized party without 

  the knowledge or cooperation of the person using such encryption        

  products or services unless the Secretary, with the concurrence of the  

  Attorney General, determines implementing this requirement would not    

  promote the purposes of this Act.                                       

          SEC. 204. PRODUCT LABELS.                                               



     An encryption product may be labeled to inform users that the product

  is authorized for sale to or for use in transactions and communications 

  with the United States Government under this title.                     

          SEC. 205. NO PRIVATE MANDATE.                                           



     The United States Government may not mandate the use of encryption   

  standards for the private sector other than for use with computer       

  systems, networks, or other systems of the United States Government, or 

  systems or networks created using Federal funds.                        

          SEC. 206. IMPLEMENTATION.                                               



     (a) Exclusion.--Nothing in this title shall apply to encryption      

  products and services used solely for access control, authentication,   

  integrity, nonrepudiation, digital signatures, or other similar         

  purposes.                                                               

     (b) Rulemaking.--The Secretary, in consultation with the Attorney    

  General and other affected agencies, may through rules provide for the  

  orderly implementation of this title and the effective use of secure    

  public networks.                                                        

           TITLE III--EXPORTS OF ENCRYPTION                                        



          SEC. 301. EXPORTS OF ENCRYPTION.                                        



     (a) Coordination of Executive Branch Agencies Required.--The         

  Secretary, in close coordination with the Secretary of Defense and any  

  other executive branch department or agency with responsibility for     

  protecting the national security, shall have the authority to control   

  the export of encryption products not controlled on the United States   

  Munitions List.                                                         

     (b) Decisions Not Subject to Judicial Review.--Decisions made by the 

  Secretary pursuant to subsection (a) with respect to exports of         

  encryption products under this title shall not be subject to judicial   

  review.                                                                 

          SEC. 302. LICENSE EXCEPTION FOR CERTAIN ENCRYPTION PRODUCTS.            



     (a) License Exception.--After January 31, 2000, encryption products, 

  without regard to encryption strength, shall be eligible for export     

  under a license exception if such encryption product--                  

    (1) is submitted to the Secretary for a 1-time product review;         



       (2) does not include features or functions that would otherwise     

   require licensing under applicable regulations;                         

       (3) is not destined for countries, end users, or end uses that the  

   Secretary, in coordination with the Secretary of Defense and other      

   executive branch departments or agencies with responsibility for        

   protecting the national security, by regulation, has determined should  

   be ineligible to receive such products, and is otherwise qualified for  

   export; and                                                             

       (4)(A) includes features or functions providing an immediate access 

   to plaintext capability, if there is lawful authority for such immediate

   access; or                                                              

       (B) includes features or functions providing an immediate decryption

   capability of the encrypted data, including communications, upon the    

   receipt of decryption information by an authorized party, and such      

   decryption can be accomplished without unauthorized disclosure.         

     (b) Enabling of Decryption Capabilities.--The features or functions  

  described in subsection (a)(4) need not be enabled by the manufacturer  

  before or at the time of export for purposes of this title. Such        

  features or functions may be enabled by the purchaser or end user.      

     (c) Responsibilities of the Secretary.--The Secretary, in close      

  coordination with the Secretary of Defense and other executive branch   

  departments or agencies with responsibility for protecting the national 

  security, shall--                                                       

       (1) specify, by regulation, the information that must be submitted  

   for the 1-time review referred to in this section; and                  

       (2) make all export determinations under this title within 30 days  

   following the date of submission to the Secretary of--                  

    (A) the completed application for a license exception; and             



       (B) the encryption product intended for export that is to be        

   reviewed as required by this section.                                   

     (d) Exercise of Other Authorities.--The Secretary, and the Secretary 

  of Defense, may exercise the authorities they have under other          

  provisions of law, including the Export Administration Act of 1979, as  

  continued in effect under the International Emergency Economic Powers   

  Act, to carry out this section.                                         

     (e) Presumption in Favor of Exports.--There shall be a presumption in

  favor of export of encryption products under this title.                

     (f) Waiver Authority.--The President may by Executive order waive any

  provision of this title, or the applicability of any such provision to a

  person or entity, if the President determines that the waiver is in the 

  interests of national security or public safety and security. The       

  President shall submit a report to the relevant committees of the       

  Congress not later than 15 days after such determination. The report    

  shall include the factual basis upon which such determination was made. 

  The report may be in classified format.                                 

     (g) Relevant Committees.--The relevant committees of the Congress    

  described in subsection (f) are the Committee on International          

  Relations, the Committee on the Judiciary, the Committee on National    

  Security, the Permanent Select Committee on Intelligence of the House of

  Representatives, and the Committee on Foreign Relations, the Committee  

  on the Judiciary, the Committee on Armed Services, and the Select       

  Committee on Intelligence of the Senate.                                

          SEC. 303. LICENSE EXCEPTION FOR TELECOMMUNICATIONS PRODUCTS.            



     After a 1-time review as described in section 302, the Secretary     

  shall authorize for export under a license exception voice encryption   

  products that do not contain decryption or access to plainvoice features

  or functions otherwise required in section 302, if the Secretary, after 

  consultation with relevant executive branch departments or agencies,    

  determines that--                                                       

       (1) information recovery requirements for such exports would        

   disadvantage United States exporters; and                               

       (2) such exports under a license exception would not create a risk  

   to the foreign policy, non-proliferation, or national security of the   

   United States.                                                          

          SEC. 304. REVIEW FOR CERTAIN INSTITUTIONS.                              



     The Secretary, in consultation with other executive branch           

  departments or agencies, shall establish a procedure for expedited      

  review of export license applications involving encryption products for 

  use by qualified banks, financial institutions, subsidiaries of         

  companies owned or controlled by United States persons, or other users  

  specifically authorized by the Secretary.                               

          SEC. 305. ENCRYPTION INDUSTRY AND INFORMATION SECURITY BOARD.           



     (a) Encryption Industry and Information Security Board               

  Established.--There is hereby established an Encryption Industry and    

  Information Security Board. The Board shall undertake an advisory role  

  for the President.                                                      

   (b)  Purposes.--The purposes of the Board are--                        



       (1) to provide a forum to foster communication and coordination     

   between industry and the Federal Government on matters relating to the  

   use of encryption products;                                             

       (2) to promote the export of encryption products manufactured in the

   United States;                                                          

       (3) to encourage research and development of products that will     

   foster electronic commerce;                                             

    (4) to recommend policies enhancing the security of public networks;   



       (5) to promote the protection of intellectual property and privacy  

   rights of individuals using public networks;                            

       (6) to enable the United States to effectively and continually      

   understand the benefits and risks to its national security, law         

   enforcement, and public safety interests by virtue of the proliferation 

   of strong encryption on the global market;                              

       (7) to evaluate and make recommendations regarding the further      

   development and use of encryption;                                      

       (8) to advance the development of international standards regarding 

   interoperability and global use of encryption products; and             

       (9) to evaluate the foreign availability of encryption products and 

   their threat to United States industry.                                 

     (c) Membership.--(1) The Board shall be composed of 13 members, as   

  follows:                                                                

       (A) The Secretary, or the Secretary's designee, who shall chair the 

   Board.                                                                  



       (B) The Attorney General, or the Director of the Federal Bureau of  

   Investigation, or a respective designee.                                

    (C) The Secretary of Defense, or the Secretary's designee.             



    (D) the Director of Central Intelligence, or his or her designee.      



       (E) The Special Assistant to the President for National Security    

   Affairs, or his or her designee.                                        

       (F) Two private sector individuals, appointed by the President, who 

   have expertise in consumer and privacy interests relating to or affected

   by information security technology.                                     

       (G) Six representatives from the private sector who have expertise  

   in the development, operation, marketing, law, or public policy relating

   to information security or technology.                                  

     (2) The six private sector representatives described in paragraph    

  (1)(G) shall be appointed as follows:                                   

    (A) Two by the Speaker of the House of Representatives.                



    (B) One by the Minority Leader of the House of Representatives.        



    (C) Two by the Majority Leader of the Senate.                          



    (D) One by the Minority Leader of the Senate.                          



     (e) Meetings.--The Board shall meet at such times and in such places 

  as the Secretary may prescribe, but not less frequently than every four 

  months. The Federal Advisory Committee Act (5 U.S.C. App.) does not     

  apply to the Board or to meetings held by the Board under this section. 

     (f) Findings and Recommendations.--The chair of the Board shall      

  convey the findings and recommendations of the Board to the President   

  and to the Congress within 30 days after each meeting of the Board. The 

  recommendations of the Board are not binding upon the President.        

     (g) Foreign Availability.--The consideration of foreign availability 

  by the Board shall include computer software that is distributed over   

  the Internet or advertised for sale, license, or transfer, including    

  over-the-counter retail sales, mail order transactions, telephone order 

  transactions, electronic distribution, or sale on approval.             

           TITLE IV--LIABILITY LIMITATIONS                                         



          SEC. 401. COMPLIANCE WITH COURT ORDER.                                  



     (a) No Liability for Compliance.--Subject to subsection (b), no civil

  or criminal liability under this Act, or under any other provision of   

  law, shall attach to any person for disclosing or providing--           

    (1) the plaintext of encrypted data, including communications;         



       (2) the decryption information of such encrypted data, including    

   communications; or                                                      

       (3) technical assistance for access to the plaintext of, or         

   decryption information for, encrypted data, including communications.   

     (b) Exception.--Subsection (a) shall not apply to a person who       

  provides plaintext or decryption information to another and is not      

  authorized by court order to disclose such plaintext or decryption      

  information.                                                            

          SEC. 402. COMPLIANCE DEFENSE.                                           



     Compliance with the provisions of sections 2806, 2807, 2808, or 2809 

  of title 18, United States Code, as added by section 104(a) of this Act,

  or any regulations authorized thereunder, shall provide a complete      

  defense for any civil action for damages based upon activities covered  

  by this Act, other than an action founded on contract.                  

          SEC. 403. REASONABLE CARE DEFENSE.                                      



     The participation by person in the key management infrastructure     

  established by regulation for United States Government information      

  security operations under section 103 shall be treated as evidence of   

  reasonable care or due diligence in any proceeding where the            

  reasonableness of one's actions is an element of the claim at issue.    

          SEC. 404. GOOD FAITH DEFENSE.                                           



     An objectively reasonable reliance on the legal authority provided by

  this Act and the amendments made by this Act, requiring or authorizing  

  access to the plaintext of otherwise encrypted data, including          

  communications, or to the decryption information that will allow the    

  immediate decryption of data, including communications, that is         

  otherwise encrypted, shall be a complete defense to any criminal or     

  civil action that may be brought under the laws of the United States or 

  any State.                                                              

          SEC. 405. SOVEREIGN IMMUNITY.                                           



     Except as otherwise specifically provided otherwise, nothing in this 

  Act or the amendments made by this Act, or any regulations promulgated  

  thereunder, modifies or amends the sovereign immunity of the United     

  States.                                                                 

          SEC. 406. CIVIL ACTION, GENERALLY.                                      



     A civil action may be brought against any person who, regardless of  

  that person's participation in the key management infrastructure to be  

  established by regulations promulgated by the Secretary pursuant to     

  section 103, violates or acts in a manner that is inconsistent with or  

  violates the provisions or intent of this Act or the amendments made by 

  this Act.                                                               

           TITLE V--INTERNATIONAL AGREEMENTS                                       



          SEC. 501. SENSE OF CONGRESS.                                            



   It is the sense of Congress that--                                     


       (1) the President should conduct negotiations with foreign          

   governments for the purposes of mutual recognition of any key management

   infrastructures, and their component parts, that exist or are developed;

   and                                                                     

       (2) such mutual recognition agreements will safeguard the privacy of

   the citizens of the United States, prevent economic espionage, and      

   enhance the information security needs of the United States.            

          SEC. 502. FAILURE TO NEGOTIATE.                                         



     The President may consider a government's refusal to negotiate mutual

  recognition agreements described in section 501 when considering the    

  participation of the United States in any cooperation or assistance     

  program with that country.                                              

          SEC. 503. REPORT TO CONGRESS.                                           



     (a) Report to Congress.--The President shall report annually to the  

  Congress on the status of the international effort outlined by section  

  501.                                                                    

     (b) First Report.--The first report required under subsection (a)    

  shall be submitted in unclassified form no later than December 15, 1998.

           TITLE VI--MISCELLANEOUS PROVISIONS                                      



          SEC. 601. EFFECT ON LAW ENFORCEMENT ACTIVITIES.                         



     (a) Collection of Information by Attorney General.--The Attorney     

  General shall compile, and maintain in classified form, data on the     

  instances in which encryption has interfered with, impeded, or          

  obstructed the ability of the Department of Justice to enforce the      

  criminal laws of the United States.                                     

     (b) Availability of Information to the Congress.--The information    

  compiled under subsection (a), including an unclassified summary        

  thereof, shall be made available, upon request, to any Member of        

  Congress.                                                               

          SEC. 602. INTERPRETATION.                                               



     Nothing contained in this Act or the amendments made by this Act     

  shall be deemed to--                                                    

       (1) preempt or otherwise affect the application of the Arms Export  

   Control Act (22 U.S.C. 2751 et seq.), the Export Administration Act of  

   1979 (50 U.S.C. App. 2401 et seq.), or the International Emergency      

   Economic Powers Act (50 U.S.C. 1701 et seq.) or any regulations         

   promulgated thereunder;                                                 

    (2) affect foreign intelligence activities of the United States; or    



       (3) negate or diminish any intellectual property protections under  

   the laws of the United States or of any State.                          

          SEC. 603. SEVERABILITY.                                                 



     If any provision of this Act or the amendments made by this Act, or  

  the application thereof, to any person or circumstances is held invalid 

  by a court of the United States, the remainder of this Act or such      

  amendments, and the application thereof, to other persons or            

  circumstances shall not be affected thereby.                            



                                          PURPOSE                                 



      Americans expect their phone calls, electronic mail, personal        

   documents, and electronic commercial activities to be secure and        

   private. The rapid expansion of communication and computer technology   

   has created vulnerabilities that leave many personal communications and 

   commercial transactions potentially exposed to fraud and misuse. The    

   development and use of strong encryption is essential to a thriving     

   electronic communications capability, and necessary to help safeguard   

   privacy and protect ourselves from crime. H.R. 695 promotes the         

   development and distribution of strong encryption technologies that are 

   intended to provide a heightened level of security and freedom to engage

   in electronic commerce.                                                 

      Chief among the government's obligations to its people is the duty to

   protect them from threats of harm to their persons or property.         

   Similarly, in order to establish and maintain a government that serves  

   the common good and provides for the common defense, which the Framers  

   acknowledged was essential to a free society, national security         

   interests must be carefully weighed against the people's inalienable    

   rights of life, liberty, and property. With this interest in maintaining

   the balance between individual rights and our nation's security, the    

   Permanent Select Committee on Intelligence sought and obtained referral 

   of the bill, H.R. 695. The Committee's consideration of H.R. 695 brought

   to light that the bill as introduced and reported by the Committee on   

   the Judiciary, though certainly well-intentioned, left our intelligence 

   and intelligence-related capabilities at considerable risk. Likewise,   

   enacted without amendment, it might jeopardize the nation's (including  

   our state and local law enforcement agencies) ability to investigate,   

   apprehend, and prosecute criminals of the most serious stripe.          

      The Committee received evidence that strong encryption has already   

   been used to facilitate drug trafficking, protect child pornographers,  

   shield terrorist plots and communications, and hide evidence of credit  

   card fraud, among other notable crimes. Furthermore, the Committee is of

   the view that such a law enforcement and national security risk should  

   not be left to the forces of the marketplace. Doing so abdicates the    

   responsibility of the government to protect its people from enemies,    

   both foreign and domestic.                                              

      Thus, the amendment in the nature of a substitute to H.R. 695,       

   reported favorably by the Committee, seeks simply to ensure that the    

   critical national security and law enforcement concerns at issue in this

   debate over the nature and direction of encryption policy for the United

   States will be seriously addressed.                                     

                                          SUMMARY                                 



                            section-by-section                           



           Section 1.--Short title                                                 



      This section provides the title of the bill as the ``Security and    

   Freedom through Encryption (``SAFE'') Act of 1997.''                    

           Section 2.--Statement of policy                                         



      This section sets forth the policy of the United States with respect 

   to encryption technology.                                               

                            TITLE I--DOMESTIC USES OF ENCRYPTION                  



           Section 101.--Definitions                                               



      This section establishes the definitions of specific terms used      

   throughout the bill.                                                    

           Section 102.--Lawful use of encryption                                  



      This section makes clear that, except as otherwise provided, it is   

   lawful to use encryption products, regardless of algorithm length       

   selected, encryption key length chosen, or implementation technique or  

   medium used.                                                            

                      Section 103.--Voluntary private sector participation in key  

           management infrastructure                                               

      Subsection (a) clarifies that the use of certificate authorities or  

   key recovery agents is completely voluntary.                            

      Subsection (b) provides the Secretary of Commerce with regulatory    

   authority to establish standards for creating voluntary key management  

   infrastructures. The Committee believes that the development of key     

   management infrastructures is important to the interoperability that is 

   necessary for the further development of safe and secure electronic     

   commerce. Any regulations promulgated should allow the voluntary        

   participation of private persons and non-federal entities. These        

   regulations should also encourage the development of certificate        

   authorities and key recovery agents.                                    

      Subsection (c) will permit key recovery agents or certificate        

   authorities to register themselves with the Commerce Department. In     

   addition, such entities will be allowed, if they choose, to identify    

   themselves as meeting the standards established by the Secretary.       

           Section 104.--Unlawful use of encryption                                



      This section amends Title 18, United States Code, by new sections    

   2801 through 2811 within a new chapter 122, which bears the heading,    

   ``Chapter 122-Encrypted Data, Including Communications.''               

      New section 2801 of title 18, United States Code, would make it a    

   criminal offense to use encryption in furtherance of the commission of a

   federal crime. The penalties attached to such crimes would be in        

   addition to any sentence imposed for the underlying offense. For first  

   time offenders, the potential penalties are not more than 5 years in    

   prison, a fine under Title 18, United States Code,\1\                   

    or both. For repeat offenders of this provision, the jail time is      

   potentially no more than an additional 10 years. This section would     

   apply equally to any investigative or law enforcement officer who is    

   found to have violated these provisions.                                

   \1\Title 18, United States Code, Section 3571 establishes the fine      

   schedule for all Title 18 criminal violations. For an individual        

   convicted of a felony, the fine would, generally, be $250,000. For an   

   organization convicted of a felony, the fine would, generally, be       

   $500,000. Some specific criminal provisions may specify higher fine     

   amounts. Any criminal provision authorizing a lower fine amount is      

   nullified by enactment of subsection (e) of section 3571 of Title 18,   

   United States Code.                                                     



      New section 2801 creates several new crimes. First, it makes it      

   illegal to intentionally obtain or use decryption information without   

   lawful authority in order to decrypt data, including information. Next, 

   it makes it a criminal offense to exceed lawful authority in decrypting 

   data, including communications. This new section would make the breaking

   of the encryption code of another without lawful authority and with the 

   purpose of violating that person's privacy or security, or for the      

   purpose of depriving that person of his or her property a criminal      

   violation of law. Likewise, it would be illegal to impersonate another  

   for the purpose of obtaining that person's decryption information       

   without lawful authority. Importantly, it also makes it unlawful to     

   facilitate or assist in the encryption of data, including               

   communications, that are to be used in furtherance of a crime. Finally, 

   it makes it illegal to otherwise disclose decryption information in     

   violation of the provisions of new chapter 122 of Title 18, United      

   States Code. Each of these criminal violations is subject to a potential

   penalty of not more than 10 years in prison, a fine under Title 18,     

   United States Code, or both. This section would apply equally to any    

   investigative or law enforcement officer who is found to have violated  

   these provisions.                                                       

      New section 2803 will make it unlawful after January 31, 2000, to    

   sell in interstate or foreign commerce any encryption product that does 

   not provide duly authorized persons an immediate access to plaintext    

   capability, or immediate decryption capability. Under this new chapter  

   of Title 18, United States Code, such duly authorized persons only      

   include those presenting an order from a court of competent jurisdiction

   requiring that such access or provision of decryption information be    

   made. This section would apply equally to any investigative or law      

   enforcement officer who is found to have violated these provisions.     

      New section 2804 establishes manufacturing and service requirements  

   on encryption products intended for distribution and use after January  

   31, 2000. Subsection (a) requires all public network service providers  

   to offer encryption products or services that ensure an immediate       

   decryption capability or an immediate access to plaintext capability.   

      Subsection (b) requires any person who manufactures for distribution,

   distributes, or imports encryption products intended for sale or use in 

   the United States to include in such products features or functions that

   provide an immediate access to plaintext capability. These features or  

   functions must permit the immediate decryption of data, including       

   communications, without the knowledge or cooperation of the person being

   investigated, but only upon the presentation of a facially valid order  

   issued by a court of competent jurisdiction. Alternatively, encryption  

   products may be manufactured for distribution, distributed, or imported 

   even if they do not meet the requirements set forth above, so long as   

   they can be used only on systems or networks that include features or   

   functions that otherwise provide the immediate access to plaintext      

   capability previously discussed. Finally, persons are free to           

   manufacture encryption products that do not comport with any of the     

   requirements set forth here, so long as they otherwise meet the         

   technical requirements and functional criteria established by the       

   Attorney General, pursuant to subsection (c).                           

      Subsection (c) provides the Attorney General with regulatory         

   authority to promulgate technical requirements and functional criteria  

   for encryption products that will allow for an immediate access to      

   plaintext capability, or otherwise enable the immediate decryption of   

   the otherwise encrypted data, including communications. This subsection 

   provides industry with an opportunity to seek an advisory opinion from  

   the Attorney General as to a particular product intended for            

   manufacturer or distribution. Such advisory opinions serve an important 

   function in that they will provide the industry with clear guidance on  

   products intended for sale. This procedure will hopefully alleviate the 

   need for lawsuits to enjoin the distribution or manufacture of          

   encryption products. This subsection specifically provides that the     

   Attorney General cannot require a particular methodology to be used in  

   meeting her technical requirements or functional criteria.              

      Subsection (d) authorizes the use, even after January 31, 2000, of   

   encryption products purchased or in use prior to that date. This        

   alleviates any ex post facto problem. The Committee also recognizes that

   industry will need to develop new product lines to comply with the      

   provisions of this amendment. Thus, in order to allow those             

   manufacturers an opportunity to recoup some of their research and       

   development investment this provision allows them to continue to sell   

   their current product line for the next two-plus years.                 

      New section 2805 sets forth procedures whereby the onus is on the    

   government to prohibit the manufacture or distribution of an encryption 

   product, after January 31, 2000, that she or the Secretary of Commerce  

   believes does not meet the technical requirements or functional criteria

   established by the Attorney General. The Committee believes that it is  

   appropriate for the Attorney General to bear the burden, in a court of  

   law, before an independent arbiter of the facts, of keeping a particular

   encryption product out of the market place. The provision allows for the

   closure of such proceedings to protect the proprietary interest in any  

   information that might be disclosed through a public proceeding.        

   Furthermore, the provision will provide those who obtained an advisory  

   opinion with an absolute defense to the lawsuit as long as the product  

   at issue comports in every aspect with the requirements announced in the

   Attorney General's advisory opinion.                                    

      New section 2806 sets forth the standards and procedures for the     

   issuance of a court order granting an investigative or law enforcement  

   officer access to the plaintext of otherwise encrypted data, including  

   communications, or compelling the provision of decryption information to

   an investigative or law enforcement officer. The application for such   

   order must be made by an attorney for the government. That application  

   must establish facts supporting the finding that the plaintext or       

   decryption information is relevant to an on-going and legitimate law    

   enforcement or foreign counterintelligence investigation. The           

   application and any order issued thereon may be made ex parte and placed

   under seal. Disclosure of the application or order is not authorized by 

   anyone, except as otherwise permitted by this section, or another order 

   of the court. This section also comports with any obligation the United 

   States may have to any foreign government under any effective Mutual    

   Legal Assistance Treaties                                               

      This section also requires that the court granting access to         

   plaintext or the disclosure of decryption information, shall also ensure

   that a verifiable audit trail of any access to plaintext or decryption  

   information be maintained. This record shall not be maintained in a     

   place or in a manner under the custody or control of the investigative  

   or law enforcement officer gaining the access under this section. The   

   record will then be tendered to the court upon an order of the court.   

      Subsection (d) clarifies that nothing in this new chapter shall be   

   read to expand or modify any other constitutional or statutory          

   requirement under which a government entity is entitled to intercept or 

   obtain oral, wire, or electronic communications, or information.        

      Subsection (e) mandates a strict construction of this new chapter so 

   that it is read only to apply to a government entity's ability to       

   decrypt or otherwise gain access to the plaintext of data, including    

   communications, for which it previously obtained lawful authority to    

   intercept or obtain.                                                    

      New section 2807 provides the users of encryption products with a    

   statutory right to be notified when their decryption information is     

   provided to law enforcement, or when law enforcement is granted access  

   to the plaintext of their data, including communications. This section  

   does provide for a delayed notification to the user so as not to        

   jeopardize the integrity of the on-going criminal investigation or      

   foreign counter-intelligence investigation. Basically, the user must be 

   notified within 90 days after the filing of an application for the      

   decryption information, or for access to the plaintext, unless the judge

   finds good cause warranting the delay. Specifically, however, none of   

   the decrypted contents of the encrypted information that has been       

   obtained, nor any evidence derived therefrom may be used in any         

   proceeding unless the user has been furnished with a copy of the order, 

   application, and the data, including communications. The user may move  

   to suppress the use of any of the plaintext or evidence derived         

   therefrom in any proceeding on the grounds that the plaintext or the    

   decryption information was unlawfully obtained. This section also       

   provides aggrieved persons with a civil cause of action for any         

   violations of this new chapter.                                         

      New section 2808 limits the lawful uses of any plaintext or          

   decryption information may be put. It may be used for the purposes of   

   conducting a lawful criminal or foreign counterintelligence             

   investigation, and for the purposes of preparing for and prosecuting any

   criminal violation of law. It may not be disclosed to any party to a    

   civil suit that does not arise from the criminal investigation or       

   prosecution, unless a court finds that there is no alternative means of 

   obtaining the plaintext, or decryption information and that the         

   interests of justice would not be served by nondisclosure. This section 

   further clarifies that decryption information may not be used to        

   determine the plaintext unless the officer possesses other lawful       

   authority to the plaintext.                                             



      This section also outlines the procedures for returning or destroying

   any decryption information upon the conclusion of the investigation,    

   trial, or proceeding.                                                   

      This section also places limitations upon any person acting as a key 

   recovery agent. It specifies to whom and under what circumstances       

   decryption information may be provided to another person by a key       

   recovery agent.                                                         

      New section 2809 requires those who are providing decryption         

   information to an investigative or law enforcement officer to so        

   identify that information in order to avoid any inadvertent disclosure. 

   The officer is responsible for maintaining the decryption information in

   such a manner so as to reasonably assure against inadvertent disclosure.

      New section 2810 makes it a crime to knowingly export an encryption  

   product after January 31, 2000 that does not include an immediate access

   to plaintext capability, or that does not provide an immediate          

   decryption capability. This criminal provision carries a potential      

   prison term of not more than 5 years.                                   

      New section 2811 incorporates the definitions set forth at section   

   101 of this Act as the definitions to be utilized for new chapter 122 of

   Title 18, United States Code.                                           

                              TITLE II--GOVERNMENT PROCUREMENT                    



           Section 201.--Federal purchases of encryption products                  



      This section requires the United States Government, after January 1, 

   1999, to purchase only those encryption products enabling the immediate 

   decryption by an authorized party, without the knowledge or cooperation 

   of the person using the encryption product. This requirement only       

   applies to those products or services obtained for providing security   

   service for a federal computer system.                                  

           Section 202.--Encryption products purchased with Federal funds          



      This section requires that any encryption product or service         

   purchased directly with federal funds after January 1, 1999, shall      

   enable the immediate decryption by an authorized party, without the     

   knowledge or cooperation of the person using the encryption product. The

   Committee does not intend that this provision applies to any product    

   purchased by institutions receiving federal grants or other funding, if 

   such institution does not require interoperability with the United      

   States government, such as universities or public libraries.            

           Section 203.--Networks established with Federal funds                   



      This section requires that any communications network that is        

   established directly with federal funds after January 1, 1999, must use 

   encryption products that include techniques enabling the immediate      

   decryption of data, including communications, without the knowledge or  

   cooperation of the person using the encryption product or service. It is

   not intended that private communications networks that might benefit    

   from federal grants satisfy this requirement. Rather, the Committee     

   intends that this provision apply solely to those communication networks

   established for the purpose of communication with the United States     

   government, either on a contractual basis, or as an element of the      

   government.                                                             

           Section 204.--Product labels                                            



      This section allows for the labeling of encryption products so that  

   purchasers and users are aware that the product is authorized for sale  

   to, or for use in transactions with, the United States government.      

           Section 205.--No private mandate                                        



      This section articulates the policy that the United States government

   shall not require the use of particular encryption standards for the    

   private sector.                                                         

           Section 206.--Implementation                                            



      This section specifically states that encryption products used solely

   for access control, authentication, integrity, nonrepudiation, or       

   digital signatures are not covered by the provisions of this title.     

   Moreover, this section grants the Secretary of Commerce regulatory      

   authority to effectuate the provisions of this title.                   

                              TITLE III--EXPORTS OF ENCRYPTION                    



           Section 301.--Exports of encryption                                     



      Subsection (a) establishes that the Secretary of Commerce, acting in 

   close coordination with the Secretary of Defense, and other executive   

   branch agencies with responsibility for protecting the national         

   security, has the authority to exercise control over the export of      

   encryption products.                                                    

      Subsection (b) clarifies that export control decisions made by the   

   Secretary are not subject to judicial review.                           

           Section 302.--License exception for certain encryption products         



      Subsection (a) sets criteria for export license exceptions of        

   encryption products after January 31, 2000. Specifically, products      

   eligible for exemptions must: be submitted to the Secretary of Commerce 

   for a 1-time product review; not include features that would require    

   licensing under other applicable regulations; not be destined for       

   countries that are determined ineligible on national security grounds.  

   In addition, the product must include a means of obtaining immediate    

   access to plaintext capability if there is lawful authority for such    

   access.                                                                 

      Subsection (b) clarifies that the immediate access to plaintext      

   capability need not be enabled by the manufacturer before or at the time

   of export.                                                              

      Subsection (c) requires the Secretary, in close coordination with the

   Secretary of Defense and other relevant executive branch agency heads,  

   to promulgate regulations for the 1-time review process; and sets a time

   limit of 30 days for that review process. This subsection establishes   

   that the 30-day time clock starts when the Secretary has received a     

   completed application for license exception and the encryption product  

   intended for export.                                                    

      Subsection (d) clarifies that the Secretary of Commerce and the      

   Secretary of Defense still maintain any authorities they currently      

   possess under any other provisions of law, including the Export         

   Administration Act of 1979, as continued in effect under the            

   International Emergency Economic Powers Act.                            

      Subsection (e) establishes a presumption in favor of exporting       

   products submitted to the Secretary under this section. The burden will 

   be on the Secretary of Commerce to deny export.                         

      Subsection (f) provides the President with the authority to waive any

   portion of this title for national security purposes. Requires the      

   President to report to the relevant committees of Congress within 15    

   days after this authority is used.                                      

      Subsection (g) lists the committees in the House and Senate that     

   would receive a report under the previous subsection.                   

           Section 303.--License exception for telecommunications products         



      This section provides a specific exemption for certain voice         

   encryption products. Products will be eligible for this exemption if,   

   after a 1-time review, the Secretary of Commerce determines that the    

   inclusion of information recovery capability would disadvantage U.S.    

   exporters; and the export of the voice encryption product would not pose

   a risk to foreign policy, nonproliferation, or national security.       

           Section 304.--Review for certain institutions                           



      This section requires the Secretary of Commerce to establish an      

   expedited export license exception review process for encryption        

   products to be used by qualified banks, financial institutions, U.S.    

   businesses, and other users specifically authorized by the Secretary.   

           Section 305.--Encryption Industry and Information Security Board        





      This section establishes an Encryption Industry and Information      

   Security Board (``EIISB'') to advise the President on future encryption 

   policy and technological advancements that would serve to alter the     

   United States policy on encryption products. This section also defines  

   the purposes of the board. It further specifies that the Board shall be 

   composed of 13 members, and how those members shall be appointed. In    

   addition to the Secretaries of Commerce and Defense, the Attorney       

   General or the FBI Director, the Director of Central Intelligence, and  

   the National Security Advisor to the President, or their designees will 

   sit on the EIIS Board. The board shall include two individuals appointed

   by the President who should have no ties to the industry, but who can   

   represent the interests of consumer groups and civil liberties advocacy 

   groups. There will also be appointed six representatives from the       

   private sector who together have expertise in the many facets of        

   information security, including the technical and legal issues          

   surrounding the use of information security technology. The Board will  

   report to the President and Congress, and their recommendations are not 

   binding.                                                                

                               TITLE IV--LIABILITY LIMITATIONS                    



           Section 401.--Compliance with court order                               



      This section states that a person shall not be held civilly or       

   criminally liable under this Act, or under any other provision of law,  

   for acting in compliance with a court order compelling the disclosure of

   plaintext or decryption information.                                    

           Section 402.--Compliance defense                                        



      This section provides a complete defense for any non-contract action 

   for damages based upon activities covered by the Act as long as the     

   person complies with the provisions of sections 2806, 2807, 2808, or    

   2809 of title 18, United States Code, as added by section 104(a) of this

   Act, or any regulations authorized thereunder.                          

           Section 403.--Reasonable care defense                                   


      This provision encourages the participation in a key management      

   infrastructure that meets the standards suggested by the Secretary of   

   Commerce under section 103 of this Act. This section authorizes the use 

   of one's participation in such key management infrastructure as evidence

   of reasonable care in a case where the reasonableness of one's actions  

   is at issue.                                                            

           Section 404.--Good faith defense                                        



      This section provides anyone who relies on the legal authority       

   provided under this Act as the basis for providing an investigative or  

   law enforcement officer with access to the plaintext of otherwise       

   encrypted data, including communications, or for providing such officer 

   with decryption information, with a complete defense to any criminal or 

   civil action arising therefrom.                                         

           Section 405.--Sovereign immunity                                        



      This section clarifies that nothing in this Act modifies or amends   

   the sovereign immunity of the United States.                            

           Section 406.--Civil action, generally                                   



      This section allows a civil action to be brought against any person  

   who violates or acts in a way that is inconsistent with the provisions  

   or intent of this Act.                                                  

                              TITLE V--INTERNATIONAL AGREEMENTS                   



           Section 501.--Sense of Congress                                         



      This section expresses the Sense of Congress that the President      

   should negotiate with foreign governments to establish mutual           

   recognition of key management infrastructures.                          

           Section 502.--Failure to negotiate                                      



      This section permits the President to take a country's refusal to    

   negotiate into consideration when making decisions about U.S.           

   participation in any cooperation or assistance program with that        

   country.                                                                

           Section 503.--Report to Congress                                        



      This section requires an annual report to Congress on the status of  

   the negotiations, with the first report due December 15, 1998.          

                             TITLE VI--MISCELLANEOUS PROVISIONS                   



           Section 601.--Effect on law enforcement activities                      



      This section requires the Attorney General to compile, and maintain  

   in classified form, information on those instances where encryption has 

   posed problems in the enforcement of federal laws. This information will

   be available to any Member of Congress upon request.                    

           Section 602.--Interpretation                                            



      This section clarifies the relationship of the bill to the           

   interpretation of certain laws: the bill does not preempt the           

   application of other important export control acts, including: the Arms 

   Export Control Act, the Export Administration Act, or the International 

   Emergency Economic Powers Act; it does not affect foreign intelligence  

   activities of the United States; nor does it diminish US or State       

   intellectual property protections.                                      

           Section 603.--Severability                                              



      This section permits any court reviewing this Act to sever any       

   provision from the remainder of the Act, so as not to find the Act      

   invalid in its entirety.                                                

                            BACKGROUND AND NEED FOR LEGISLATION                   



      H.R. 695, as amended by the Committee on the Judiciary, has broad    

   implications on the intelligence and intelligence-related activities of 

   the United States. The Intelligence Committee has jurisdiction over     

   legislation relating to the intelligence and intelligence-related       

   capabilities of the United States, including the FBI's domestic         

   counter-intelligence and counter-terrorism functions. Thus, upon the    

   Chairman's request, the Speaker referred the bill to the Committee for  

   its consideration.                                                      

      Primary among the Committee's concerns was how the development of    

   strong and unbreakable encryption technology would affect the national  

   security of the United States. The Defense Department's need for        

   information security technology is essential to its force protection and

   war fighting functions. Likewise, information security is critical to   

   the President and his advisors. It is necessary to the Department of    

   State in its development of sound foreign policy. Encryption technology 

   that does not provide for access points to plaintext, or the re-capture 

   of communications and data, puts these needs at considerable risk.      

      The development of encryption technologies that does not take into   

   consideration society's desire to prevent, investigate, and prosecute   

   crimes, is of no sizable benefit to society. Such encryption technology 

   would allow criminals to act with impunity, without concern that their  

   actions might be subject to exposure by lawful authorities. The FBI, the

   agency primarily responsible for counter-terrorism and domestic         

   counter-espionage efforts, and the investigation of child pornography   

   and kidnapping, could find itself especially handicapped in these areas.

   Likewise, the Drug Enforcement Administration, which is responsible to  

   the nation for counter-narcotics operations, could be negatively        

   affected by H.R. 695. Similarly, the Committee was greatly concerned    

   that State and local law enforcement agencies' ability to provide their 

   citizenry with a free and peaceful place to live and work would be      

   seriously jeopardized.                                                  

      As considered by the Permanent Select Committee on Intelligence, H.R.

   695 left the public's safety and our nation's security to the forces of 

   the marketplace. The ``SAFE'' Act provided no mechanism or technological

   capability for law enforcement or national security to access the       

   plaintext of data, including communications. It would ultimately have   

   rendered meaningless any other law, including the Fourth Amendment,     



                    entitling law enforcement to such evidence. It would have     

          negated our intelligence collectors' abilities to perform their vital   

          national security functions. The Committee found that, to the detriment 

          of the national security and law enforcement equities of the United     

          States, H.R. 695 encouraged the development of unbreakable encryption   

          technologies, seeming based upon an absolutist's view of the First      

          Amendment and one's ``right of privacy.''                               

      H.R. 695 did nothing to encourage the development of systems or      

   software that would meet the crucial needs of national security or law  

   enforcement. The bill placed the determination of whether a particular  

   export of encryption technology affected the national security interests

   of the United States solely in the hands of the Secretary of Commerce,  

   with no role whatsoever for the national security apparatus of the      

   United States government. This, despite the proponents acknowledgment of

   the national security benefit that encryption technology can provide to 

   the government.                                                         

      The proponents of H.R. 695 argue that the legislation enhances the   

   needs of law enforcement. They contend that strong encryption software, 

   widely available to the public, will secure our computer networks,      

   defeat fraud, and instill trust in the already booming Internet. This   

   trust, they assert, is necessary to release the opportunities available 

   through electronic commerce.                                            

   None of this is disputed.                                               



      Congress has on many occasions accepted the premise that the use of  

   electronic surveillance is a tool of utmost importance in many criminal 

   investigations, especially those involving serious and violent crime,   

   terrorism, espionage, organized crime, drug-trafficking, corruption, and

   fraud. There have been numerous cases where law enforcement, through the

   use of electronic surveillance, has not only solved and successfully    

   prosecuted serious crimes and dangerous criminals, but has also been    

   able to prevent serious and life-threatening criminal acts. For example,

   terrorists in New York were plotting to bomb the United Nations         

   building, the Lincoln and Holland tunnels, and 26 Federal Plaza as well 

   as conduct assassinations of political figures. Court-authorized        

   electronic surveillance enabled the FBI to disrupt the plot as          

   explosives were being mixed. Ultimately, the evidence obtained was used 

   to convict the conspirators. In another example, electronic surveillance

   was used to prevent and then convict two men who intended to kidnap,    

   molest and then kill a male child.                                      

      The supporters of the bill insist that the problem for law           

   enforcement is a narrow problem, only affecting approximately 1,100     

   wiretaps per year, while encryption provides great security benefits to 

   the electronic marketplace.\2\                                          

    The Committee is concerned that the problems posed by H.R. 695 are not 

   as narrow as the bill's supporters claim. The problem that some see as  

   ``narrow'' is in fact the entirety of the problem. Were the 1,100 or so 

   wiretaps conducted by federal, state, and local law enforcement agencies

   across the country in the last year protected with unbreakable          

   encryption, the scores of drug traffickers, child pornographers,        

   kidnappers, Mafiosi, terrorists, and spies that were identified,        

   investigated, and prosecuted, through the use of those wiretaps, would  

   still be at large.                                                      

   \2\Mr. Jerry Berman, Executive Director of the Center for Technology and

   Democracy before the House Judiciary Committee, March 20, 1997.         

      The Committee notes, with considerable concern, that the threat such 

   encryption creates is not limited to the FBI alone.                     

      From a national security perspective, this is not a problem that will

   begin sometime in the future; we are already encountering the effects of

   encryption today. For example:                                          

       Convicted spy Aldrich Ames was told by the Russian intelligence     

   service to encrypt computer file information that was to be passed to   

   them;                                                                   

       An international terrorist was plotting to blow up 11 U.S.-owned    

   commercial airliners in the far east. His laptop computer which was     

   seized during his arrest in Manila contained encrypted files concerning 

   this terrorist plot; and                                                

       A major international drug trafficking subject recently used a      

   telephone encryption device to frustrate court-approved electronic      

   surveillance.                                                           

      H.R. 695 did little to facilitate or promote technological           

   development of access points for interception, or provide for an        

   immediate decryption capability, through a court order process. The     

   Committee is of the view that these requirements can be fashioned in a  

   way that does not undermine a citizen's right against unreasonable      

   searches and seizures or unnecessarily abridge his or her freedom of    

   speech. There is considerable precedent in statute for a regime that    

   balances privacy, law enforcement concerns, and national security.\3\   

                                                                           



   \3\Title III of the Omnibus Crime Control Act of 1968 codified the      

   government's authority to require service providers to supply technical 

   assistance to enable law enforcement (Federal, state, and local) to     

   intercept oral, electronic, and wire communications, upon the           

   presentment of a court order. That Act balanced the competing rights of 

   the individual and the government under the 4th Amendment by setting out

   in the statute judicial oversight, minimization, and delayed            

   notification procedures that have met the test of time. That Act        

   established the constitutionality of a government mandate upon          

   technology for the societal benefit of public safety and national       

   security.                                                               

      The benefit that strong encryption, without access to plaintext      

   capabilities, provides to the individual encryption user is equally     

   provided to the person with criminal intent. The child pornographer will

   be able to operate with impunity. If there is no mechanism, no          

   technological way of decrypting his files without his permission, there 

   will be no way for the law to break his code, to access his computer    

   files, to develop evidence of his criminal acts and bring him to        

   justice. This is the world without a statutory requirement for access to

   plaintext capability for stored data, or communications.                

      Likewise, without access to plaintext capability for our intelligence

   collectors, international terrorists communicating across the Internet, 

   or through digital communications, sending encrypted messages to their  

   comrades discussing their plans to attack United States interests, can  

   rest assured that their conspiracy will not be discovered, penetrated,  

   frustrated, nor prosecuted by law enforcement authorities.              

      To be sure, as envisioned by the authors of the Bill of Rights, the  

   Fourth Amendment stands as a bulwark against unreasonable government    

   intrusion into the lives of its citizens. That freedom is jealously     

   guarded by the people, through the power and authority of the Judicial  

   Branch of our governmental structure. Certainly, the use of encryption  

   technology to protect electronic data and communication accesses the    

   same right to privacy as the use of a safe to protect paper documents.  

      Nothing in our constitutional framework, however, provides for       

   absolutes. There is no absolute freedom of expression. There is no      

   absolute freedom from search and seizure. Nothing about computer        

   technology alters this constitutional truism. The Bill of Rights        

   delicately balances the competing interests of the people and the       

   nation. The Constitution recognizes that the freedoms embodied in the   

   Bill of Rights are joined with responsibilities. The people are         

   responsible for acting within the bounds of the law. The government, on 

   the other hand, is responsible for acting reasonably. When a citizen    

   violates the law, the Constitution permits reasonable government action 

   to discover and expose that criminal activity. This is the essence of   

   the Fourth Amendment. The Committee notes with concern that encryption  

   technology, which will have enormous benefits, can also threaten the    

   underpinnings of the Constitutional balance struck in the text of the   

   Fourth Amendment if the technology is allowed to develop unchecked and  

   without regard to one's civic responsibilities.                         



      The privacy interests of encryption users should not be minimized,   

   nor given absolute value. A balance must be established. It is true that

   access to decryption information could give the government an           

   opportunity for mischief. Statutory safeguards against the impermissible

   use of decryption information can be employed to adequately deter such  

   violations of privacy. Additionally, users of encryption should be      

   notified that their decryption information has been accessed. But, the  

   timing of this notification, like that permitted by the wiretap statute,

   is very important to the integrity of any criminal or                   

   counter-intelligence investigation.                                     

      With respect to export controls over encryption products, including  

   software, hardware, and technology, it is important to the country's    

   security interests to permit the export only of those encryption        

   products that fulfill the goals of promoting and securing information   

   systems of American citizens, while at the same time enabling the       

   intelligence community to continue to support our policy makers,        

   deployed forces, and U.S. interests at home and overseas.               

      Currently, the Administration regulates the export of encryption     

   products and requires a license prior to export. On October 1, 1996, the

   Vice President announced for the Administration that it would begin     

   allowing 56-bit DES encryption products, or its equivalent, under a     

   general license upon the presentment of the product for a one-time      

   review so long as the exporting company committed to building and       

   marketing future products that were supportive of key recovery. On      

   November 1, 1996, President Clinton issued Executive Order 13026, 61    

   Fed. Reg. 58767 (November 19, 1996) implementing the policy outlined by 

   the Vice President the month before. The Administration, through        

   Ambassador Aaron, the U.S. Special Envoy for Encryption Policy, is also 

   currently engaged in a multi-lateral effort to reach agreement in the   

   international community on export standards supportive of key recovery  

   products.                                                               

      Proponents of H.R. 695 argue that export barriers need to be removed 

   to enhance and improve the already superior position of American        

   encryption manufacturers in foreign markets. They contend that our      

   software industry will in a matter of years, under the current          

   regulatory regime, suffer substantial losses in terms of jobs and       

   profits. They argue that there are encryption products already widely   

   available in foreign countries and on the Internet that are competing   

   with U.S. manufactured encryption products and in the near term could   

   strip U.S. industry of its preeminence in this field.                   

      Foreign availability is an issue that is repeatedly raised in the    

   encryption debate. Industry claims that encryption products are widely  

   available overseas, that other countries do not control their export,   

   and that American firms are suffering significant losses. A study of    

   this issue found that claims of widespread foreign availability of      

   encryption products were not entirely accurate. According to industry   

   experts, widespread use of foreign encryption has not become manifest,  

   although the pace of change and the market for information technology is

   rapid and a growing number of strong encryption products exist.         

      Only a few countries, other than the United States, produce          

   encryption products at this time. Some, like Switzerland, produce only  

   specialized products for a small segment of the market. Others, like    

   Japan, produce primarily hardware products. These countries all have    

   export controls on encryption. As noted, Ambassador Aaron is engaged in 

   regular discussions with them. The Committee believes that the issue of 

   foreign availability is one which the Administration must closely       

   monitor as we move toward a permanent policy on encryption.             

      The Committee shares the concern that American encryption products   

   could be replaced by foreign competitors. It notes, however, that the   

   American grip on the market is remarkable, not just for its share of the

   market, but for its longevity. American technology manufacturers control

   no less than 75% of the global market, despite what many consider to be 

   a ``restrictive'' policy on encryption products. It is acknowledged on  

   both sides of this issue that American encryption technology is the best

   in the world. There is no desire to undermine that position, nor        

   diminish the U.S. preeminence in this regard.                           

                                CONCLUSION                               



      The encryption policy of the United States requires a comprehensive  

   approach that takes into account the equities and prerogatives of the   

   intelligence community; federal, state, and local law enforcement;      

   industry; and the citizens of the United States. The Committee's        

   amendment in the nature of a substitute to the bill as reported by the  

   Committee on the Judiciary, which is further explained in the           

   section-by-section analysis, makes an effort at balancing the important 

   national security, public safety, and privacy interests that are at     

   stake in this debate.                                                   

                                   COMMITTEE PROCEEDINGS                          



      The Committee was briefed on the subject of encryption on May 6, 1997

   by the Hon. William Reinsch, Under Secretary, Bureau of Export          

   Administration, Department of Commerce; Hon. William Crowell, Deputy    

   Director, National Security Agency; and Hon. Robert Litt, Deputy        

   Assistant Attorney General, Criminal Division, United States Department 

   of Justice.                                                             

      The Committee held a hearing on September 9, 1997 in which it heard  

   testimony from: the Hon. Bob Goodlatte, United States Representative,   

   6th District of Virginia; Hon. Zoe Lofgren, United States               

   Representative, 16th District of California; Hon. Louis J. Freeh,       

   Director, Federal Bureau of Investigation; Hon. William Reinsch, Under  

   Secretary, Bureau of Export Administration, Department of Commerce; and 

   Hon. William Crowell, Deputy Director, National Security Agency.        

      The Committee extensively reviewed additional testimony and written  

   materials relating to encryption policy in general and H.R. 695 in      

   particular, including: ``Terrorism in the Next Millennium: Enter the    

   Cyberterrorist,'' by George R. Barth, National Counterintelligence      

   Center; ``Deciphering the Cryptography Debate,'' by Kenneth Flamm, The  

   Brookings Institution; Hon. Michelle Van Cleave, Assistant Director for 

   National Security, White House Office of Science and Technology Policy, 

   remarks before AFCEA Convention, June 25, 1992; Hon. Janet Reno, United 

   States Attorney General, letter to Members of Congress, July 18, 1997;  

   Hon. Louis J. Freeh, Director, Federal Bureau of Investigation,         

   testimony before the United States Senate Committee on Commerce, Science

   and Transportation, March 19, 1997; Hon. Louis J. Freeh, testimony      

   before the United States Senate Committee on the Judiciary, June 25,    

   1997; Hon. John Kyl, United States Senator, Arizona, remarks before the 

   Heritage Foundation, July 28, 1997;                                     

      Testimony before the United States Senate Judiciary Subcommittee on  

   Technology, Terrorism and Government Information, September 3, 1997:    

   Hon. Louis J. Freeh, Director, Federal Bureau of Investigation; Dorothy 

   E. Denning, Georgetown University; Jeffery A. Herig, Special Agent,     

   Florida Department of Law Enforcement; Robert R. Burke, Director of     

   Corporate Services and Security, Monsanto Company, and Chairman of the  

   Subcommittee for Protection of Information and Technology, Overseas     

   Security Advisory Council, United States Department of State; Ken       

   Lieberman, Senior Vice President for Corporate Risk Management, Visa    

   USA; R. Patrick Watson, Director, Worldwide Corporate Security, Eastman 

   Kodak Company;                                                          

      Testimony before the United States House of Representatives Commerce 

   Subcommittee on Telecommunications, Trade, and Consumer Protection,     

   September 4, 1997: Hon. Bob Goodlatte, United States Representative, 6th

   District of Virginia; Hon. William Reinsch, Under Secretary, Bureau of  

   Export Administration, Department of Commerce; Hon. Robert Litt, Deputy 

   Assistant Attorney General, Criminal Division, Department of Justice;   

   Stephen T. Walker, President and CEO, Trusted Information Systems, Inc.;

   Thomas Parenty, Director of Data/Communications Security, Sybase, Inc.; 

   George A. Keyworth, II, Ph.D., Chairman, Progress & Freedom Foundation; 

   Jerry Berman, Executive Director, Center for Democracy and Technology;  

      Hearing records of: Hearing on H.R. 3011 (104th Congress), before the

   United States House of Representatives Committee on the Judiciary,      

   September 25, 1996; Hearing on H.R. 695, before the United States House 

   of Representatives Judiciary Subcommittee on Courts and Intellectual    

   Property, March 20, 1997; and the redacted released transcript of the   

   United States House of Representatives International Relations Committee

   Members' briefing, June 26, 1997.                                       

      In addition, the Committee staff was briefed on the subject of       

   encryption from representatives of IBM, ORACLE, Center for Technology   

   and Democracy, Netscape, and Motorola.                                  

                                  COMMITTEE CONSIDERATION                         





      The Committee met on September 11, 1997, and in open session         

   approved, by voice vote, the Goss/Dicks amendment in the nature of a    

   substitute to H.R. 695, as amended and reported by the Committee on the 

   Judiciary. The Committee, in open session, ordered H.R. 695, as amended,

   reported favorably by voice vote, a quorum being present.               

                                   VOTE OF THE COMMITTEE                          



      During its consideration of H.R. 695, the Committee took no rollcall 

   votes.                                                                  

          FINDINGS AND RECOMMENDATIONS OF THE COMMITTEE ON GOVERNMENT REFORM AND  

                                    OVERSIGHT                                     

      With respect to clause 2(l)(3)(D) of rule XI of the Rules of the     

   House of Representatives, the Committee has not received a report form  

   the Committee on Government Reform and Oversight pertaining to the      

   subject of the bill.                                                    

                                     OVERSIGHT FINDINGS                           



      In compliance with clause 2(l)(3)(A) of rule XI of the Rules of the  

   House of Representatives, the Committee reports that the findings and   

   recommendations of the Committee, based on oversight activities under   

   clause 2(b)(1) of rule X of the Rules of the House of Representatives,  

   are incorporated in the descriptive portions of this report.            

                         NEW BUDGET AUTHORITY AND TAX EXPENDITURES                



      Clause 2(l)(3)(B) of House rule XI does not apply because this       

   legislation does not provide new budgetary authority or increased tax   

   expenditures.                                                           

                           CONGRESSIONAL BUDGET OFFICE ESTIMATES                  



       U.S. Congress,                                                          



       Congressional Budget Office,                                            



       Washington, DC, September 16, 1997.                                     







          Hon.  Porter J. Goss,                Chairman, Committee on Intelligence, 



       House of Representatives, Washington, DC.                               



       Dear Mr. Chairman: The Congressional Budget Office has prepared the 

   enclosed cost estimate for H.R. 695, the Security and Freedom Through   

   Encryption (SAFE) Act.                                                  

      If you wish further details on this estimate, we will be pleased to  

   provide them. The CBO staff contacts are Rachel Forward (for federal    

   costs); Alyssa Trzeszkowski (for revenues); Pepper Santalucia (for the  

   state and local impact); and Jean Wooster (for the private-sector       

   impact).                                                                

   Sincerely,                                                              



        James L. Blum                                                           



         (For June E. O'Neill,  Director ).                                     



   Enclosure.                                                              



           H.R. 695--Security and Freedom Through Encryption (SAFE) Act of 1997    



      Summary: H.R. 695 would establish policies for the domestic use and  

   export of encryption products that facilitate the creation of secure    

   computer networks.                                                      

      Assuming appropriation of the necessary amounts, CBO estimates that  

   enacting this bill would result in additional discretionary spending of 

   between $4.5 million and $7.1 million over the 1998 2002 period by the  

   Bureau of Export Administration (BXA) and the Department of Justice     

   (DOJ). Spending by BXA and DOJ for activities required by H.R. 695 would

   total between $9 million and $11.6 million over the next five years--as 

   compared to spending by BXA of about $4.5 million over the same period  

   under current policies. (Spending related to monitor encryption products

   by DOJ is negligible under current law.)                                

      Enacting H.R. 695 also would affect direct spending and receipts     

   beginning in fiscal year 1998 through the imposition of criminal fines  

   and the resulting spending from the Crime Victims Fund. Therefore,      

   pay-as-you-go procedures would apply. CBO estimates, however, that the  

   amounts of direct spending or receipts would not be significant.        

      H.R. 695 contains an intergovernmental mandate as defined in the     

   Unfunded Mandates Reform Act (UMRA), but CBO cannot estimate the cost of

   complying with that mandate at this time. The bill also would impose a  

   private-sector mandate on public network service providers and          

   manufacturers, distributors, and importers of encryption products. CBO  

   estimates that the total direct cost of complying with this mandate     

   would exceed the statutory threshold ($100 million in 1996, adjusted    

   annually for inflation) for private-sector mandates established in UMRA.

   CBO's full analysis of the cost of the intergovernmental and the        

   private-sector mandates will be provided under separate cover.          



      Description of the bill's major provisions: H.R. 695 would establish 

   controls for the domestic use and export of encryption technologies. The

   bill would allow individuals in the United States to use any form of    

   encryption but would prevent the sale of encryption products without    

   plaintext recovery systems after January 31, 2000. (The term            

   ``plaintext'' means the readable or comprehensible format of            

   information.) The bill would authorize the Department of Commerce to    

   exempt encryption products with plaintext recovery systems from certain 

   export licensing requirements after the same date. In addition, H.R. 695

   would require the Secretary of Commerce to establish a key management   

   system for use by the federal government and private-sector             

   organizations. A key management system enables agencies or companies to 

   entrust the code to encryption products to a third party.               

      H.R. 695 would establish procedures to enable law enforcement        

   officials to gain access to plaintext recovery systems upon presentation

   of a court order. The bill would direct the Attorney General to maintain

   data on the instances in which encryption impedes or obstructs the      

   ability of DOJ to enforce criminal laws. Finally, the bill would        

   establish criminal penalties and fines for the use of encryption        

   technologies to further a crime, for the unlawful access of encrypted   

   information, or for the unlawful sale of encryption technologies.       

           Estimated cost to the Federal Government                                



            Spending Subject to Appropriation                                       



      Under current policy, BXA would likely spend about $900,000 a year,  

   totaling $4.5 million over the 1998 2002 period, to monitor exports of  

   encryption products. Assuming appropriation of the necessary amounts,   

   CBO estimates that enacting H.R. 695 would increase BXA's               

   encryption-related costs to about $6.6 million over the same period.    

   That cost consists of two components: (1) costs to monitor encryption   

   exports, and (2) costs for the new key management system. H.R. 695 would

   authorize the Department of Commerce through BXA to exempt encryption   

   products with plaintext recovery systems from certain export licensing  

   requirements after January 31, 2000. As a result, CBO estimates that the

   agency's cost to monitor encryption exports would decrease from about   

   $900,000 in fiscal years 1998 and 1999 to about $650,000 in fiscal year 

   2000 and $500,000 in each year thereafter, for a five-year total of     

   about $3.5 million. H.R. 695 also would require the agency to establish 

   and maintain a key management system. Based on information from BXA, CBO

   estimates that establishing and maintaining this system would cost BXA  

   about $500,000 in fiscal year 1998 and $600,000 in each year thereafter,

   for a five-year total of about $3.1 million.                            

      H.R. 695 would require the Department of Justice to collect and      

   maintain data on the instances in which encryption impedes or obstructs 

   the ability of the agency to enforce criminal laws. The agency is       

   uncertain as to how much it would cost to track such classified         

   information nationwide. For the purposes of this estimate, CBO projects 

   that collecting and maintaining the data would cost DOJ between $500,000

   and $1 million a year, assuming appropriation of the necessary amounts. 

            Direct Spending and Revenues                                            



      Enacting H.R. 695 would affect direct spending and receipts through  

   the imposition of criminal fines for the use of encryption technologies 

   to further a crime, for the unlawful access of encrypted information,   

   and for the unlawful sale of encryption technologies. CBO estimates that

   collections from such fines are likely to be negligible, however,       

   because the federal government would probably not pursue many cases     

   under the bill. Any such collections would be deposited in the Crime    

   Victims Fund and spent the following year. Because the increase in      

   direct spending would be the same amount as the amount of fines         

   collected with a one-year lag, the additional direct spending also would

   be negligible.                                                          

      The costs of this legislation fall within budget functions 370       

   (commerce and housing credit) and 750 (administration of justice).      

      Pay-as-you-go considerations: Section 252 of the Balanced Budget and 

   Emergency Deficit Control Act of 1985 sets up pay-as-you-go procedures  

   for legislation affecting direct spending or receipts. H.R. 695 would   

   affect direct spending and receipts through the imposition of criminal  

   fines and the resulting spending from the Crime Victims Fund. CBO       

   estimates, however, that any collections and spending resulting from    

   such fines would not be significant.                                    



      Estimated impact on State, local, and tribal governments: H.R. 695   

   contains an intergovernmental mandate as defined in UMRA, because state 

   and local governments that offer Internet access to their citizens would

   meet the bill's definition of ``network service provider.'' As such,    

   they would be required to ensure that any encryption products or        

   services they provide enable the immediate decryption or access to the  

   plaintext of encrypted data. At the present time, CBO is unsure of how  

   many states and localities offer Internet access, as well as the steps  

   these governments would take to comply with the mandate. CBO therefore  

   cannot estimate the cost of complying with the mandate at this time and 

   cannot determine whether the threshold established in UMRA would be     

   exceeded.                                                               

      Estimated impact on the private sector: H.R. 695 would establish     

   controls on domestic encryption technology. Specifically, the bill would

   require sellers of encryption products to include features or functions 

   that permit duly authorized individuals to gain immediate access to the 

   encrypted material without the knowledge or cooperation of the user of  

   those products. Thus, it would impose a federal private-sector mandate  

   on network service providers and manufacturers, distributors, and       

   importers of encryption products. CBO estimates that the total direct   

   cost of complying with this mandate would exceed the statutory threshold

   ($100 million in 1996, adjusted annually for inflation) for             

   private-sector mandates established in UMRA.                            

      Section 4 of UMRA excludes from consideration any provisions that are

   considered necessary for national security purposes. Such provisions are

   found in Title III, Exports of Encryption.                              

      CBO's full analysis of the costs of the intergovernmental and        

   private-sector mandates will be provided under separate cover.          

      Previous CBO estimate: CBO provided cost estimates for H.R. 695 as   

   ordered reported by the House Committee on the Judiciary on May 14,     

   1997, by the House Committee on International Relations on July 22,     

   1997, and by the House Committee on National Security on September 9,   

   1997. Assuming appropriation of the necessary amounts, CBO estimates    

   that costs over the 1998 2002 period would total between $5 million and 

   $7 million for the Judiciary Committee's version, about $2.2 million for

   the International Relations Committee's version, and about $4.5 million 

   for the National Security Committee's version. In comparison, CBO       

   estimates that enacting this version of the bill would cost between $9  

   million and $11.6 million and that spending under current policies would

   total $4.5 million.                                                     

      Estimate prepared by: Federal Costs: Rachel Forward; Revenues: Alyssa

   Trzeszkowski; Impact on State, Local, and Tribal Governments; Pepper    

   Santalucia; and Impact on the Private Sector: Jean Wooster.             

      Estimate approved by: Paul N. Van de Water, Assistant Director for   

   Budget Analysis.                                                        

                                  COMMITTEE COST ESTIMATES                        



      The Committee agrees with the estimate of the Congressional Budget   

   Office.                                                                 

           SPECIFIC CONSTITUTIONAL AUTHORITY FOR CONGRESSIONAL ENACTMENT OF THIS  

                                   LEGISLATION                                    

      The intelligence and intelligence-related activities of the United   

   States government are carried out to support the national security      

   interests of the United States, to support and assist the armed forces  

   of the United States, and to support the President in the execution of  

   the foreign policy of the United States. Article 1, section 8, of the   

   Constitution of the United States provides, in pertinent part, that     

   ``Congress shall have power * * * to pay the debts and provide for the  

   common defence and general welfare of the United States; * * *''; ``to  

   raise and support Armies, * * *''; ``to provide and maintain a Navy; * *

   *'' and ``to make all laws which shall be necessary and proper for the  

   carrying into execution * * * all other powers vested by this           

   Constitution in the Government of the United States, or in any          

   Department or Officer thereof.'' Therefore, pursuant to such authority, 

   Congress is empowered to enact this legislation.                        



                   CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED          



     In compliance with clause 3 of rule XIII of the Rules of the House of

  Representatives, changes in existing law made by the bill, as reported, 

  are shown as follows (new matter is printed in italic and existing law  

  in which no change is proposed is shown in roman):                      

                                TITLE 18, UNITED STATES CODE                      



         * * * * * * *                                                           



          PART I--CRIMES                                                          



         * * * * * * *                                                           





 Chap.                                                                   



 Sec.                                                                    



         1.   General provisions                                                



        1                                                                      



         * * * * * * *                                                           





                 121. Stored wire and electronic communications and             

        transactional records access                                            

        2701                                                                   





         122. Encrypted data, including communications                          



        2801                                                                   





         * * * * * * *                                                           





                    CHAPTER 122--ENCRYPTED DATA, INCLUDING COMMUNICATIONS         





 Sec.                                                                    



      2801. Unlawful use of encryption in furtherance of a criminal act.      



      2802. Privacy protection.                                               



      2803. Unlawful sale of encryption.                                      



            2804. Encryption products manufactured and intended for use in the

      United States.                                                          

      2805. Injunctive relief and proceedings.                                



      2806. Court order access to plaintext.                                  



      2807. Notification procedures.                                          



      2808. Lawful use of plaintext or decryption information.                



      2809. Identification of decryption information.                         



      2810. Unlawful export of certain encryption products.                   



      2811. Definitions.                                                      





          2801. Unlawful use of encryption in furtherance of a criminal act       



     (a) Prohibited Acts.--Whoever knowingly uses encryption in           

  furtherance of the commission of a criminal offense for which the person

  may be prosecuted in a district court of the United States shall--      

       (1) in the case of a first offense under this section, be imprisoned

   for not more than 5 years, or fined under this title, or both; and      

       (2) in the case of a second or subsequent offense under this        

   section, be imprisoned for not more than 10 years, or fined under this  

   title, or both.                                                         

     (b) Consecutive Sentence.--Notwithstanding any other provision of    

  law, the court shall not place on probation any person convicted of a   

  violation of this section, nor shall the term of imprisonment imposed   

  under this section run concurrently with any other term of imprisonment 

  imposed for the underlying criminal offense.                            

     (c) Probable Cause Not Constituted by Use of Encryption.--The use of 

  encryption alone shall not constitute probable cause to believe that a  

  crime is being or has been committed.                                   

          2802. Privacy protection                                                



     (a) In General.--It shall be unlawful for any person to              

  intentionally--                                                         

       (1) obtain or use decryption information without lawful authority   

   for the purpose of decrypting data, including communications;           

       (2) exceed lawful authority in decrypting data, including           

   communications;                                                         

       (3) break the encryption code of another person without lawful      

   authority for the purpose of violating the privacy or security of that  

   person or depriving that person of any property rights;                 

       (4) impersonate another person for the purpose of obtaining         

   decryption information of that person without lawful authority;         

       (5) facilitate or assist in the encryption of data, including       

   communications, knowing that such data, including communications, are to

   be used in furtherance of a crime; or                                   

       (6) disclose decryption information in violation of a provision of  

   this chapter.                                                           

     (b) Criminal Penalty.--Whoever violates this section shall be        

  imprisoned for not more than 10 years, or fined under this title, or    

  both.                                                                   

          2803. Unlawful sale of encryption                                       



     Whoever, after January 31, 2000, sells in interstate or foreign      

  commerce any encryption product that does not include features or       

  functions permitting duly authorized persons immediate access to        

  plaintext or immediate decryption capabilities shall be imprisoned for  

  not more than 5 years, fined under this title, or both.                 

                    2804. Encryption products manufactured and intended for use in

          the United States                                                       

     (a) Public Network Service Providers.--After January 31, 2000, public

  network service providers offering encryption products or encryption    

  services shall ensure that such products or services enable the         

  immediate decryption or access to plaintext of the data, including      

  communications, encrypted by such products or services on the public    

  network upon receipt of a court order or warrant, pursuant to section   

  2806.                                                                   

     (b) Manufacturers, Distributors, and Importers.--After January 31,   

  2000, it shall be unlawful for any person to manufacture for            

  distribution, distribute, or import encryption products intended for    

  sale or use in the United States, unless that product--                 

       (1) includes features or functions that provide an immediate access 

   to plaintext capability, through any means, mechanism, or technological 

   method that--                                                           

       (A) permits immediate decryption of the encrypted data, including   

   communications, upon the receipt of                                     



                    decryption information by an authorized party in possession of

          a facially valid order issued by a court of competent jurisdiction; and 

       (B) allows the decryption of encrypted data, including              

   communications, without the knowledge or cooperation of the person being

   investigated, subject to the requirements set forth in section 2806;    

       (2) can be used only on systems or networks that include features or

   functions that provide an immediate access to plaintext capability,     

   through any means, mechanism, or technological method that--            

       (A) permits immediate decryption of the encrypted data, including   

   communications, upon the receipt of decryption information by an        

   authorized party in possession of a facially valid order issued by a    

   court of competent jurisdiction; and                                    

       (B) allows the decryption of encrypted data, including              

   communications, without the knowledge or cooperation of the person being

   investigated, subject to the requirements set forth in section 2806; or 

       (3) otherwise meets the technical requirements and functional       

   criteria promulgated by the Attorney General under subsection (c).      

   (c)  Attorney General Criteria.--                                      



       (1) Publication of requirements.--Within 180 days after the date of 

   the enactment of this chapter, the Attorney General shall publish in the

   Federal Register technical requirements and functional criteria for     

   complying with the decryption requirements set forth in this section.   

       (2) Procedures for advisory opinions.--Within 180 days after the    

   date of the enactment of this chapter, the Attorney General shall       

   promulgate procedures by which data network service providers and       

   encryption product manufacturers, sellers, re-sellers, distributors, and

   importers may obtain advisory opinions as to whether an encryption      

   product intended for sale or use in the United States after January 31, 

   2000, meets the requirements of this section and the technical          

   requirements and functional criteria promulgated pursuant to paragraph  

   (1).                                                                    

       (3) Particular methodology not required.--Nothing in this chapter or

   any other provision of law shall be construed as requiring the          

   implementation of any particular decryption methodology in order to     

   satisfy the requirements of subsections (a) and (b), or the technical   

   requirements and functional criteria required by the Attorney General   

   under paragraph (1).                                                    

     (d) Use of Prior Products Lawful.--After January 31, 2000, it shall  

  not be unlawful to use any encryption product purchased or in use prior 

  to such date.                                                           

          2805. Injunctive relief and proceedings                                 



     (a) Injunction.--Whenever it appears to the Secretary or the Attorney

  General that any person is engaged in, or is about to engage in, any act

  that constitutes, or would constitute, a violation of section 2804, the 

  Attorney General may initiate a civil action in a district court of the 

  United States to enjoin such violation. Upon the filing of the complaint

  seeking injunctive relief by the Attorney General, the court shall      

  automatically issue a temporary restraining order against the party     

  being sued.                                                             

     (b) Burden of Proof.--In a suit brought by the Attorney General under

  subsection (a), the burden shall be upon the Government to establish by 

  a preponderance of the evidence that the encryption product involved    

  does not comport with the requirements set forth by the Attorney General

  pursuant to section 2804 providing for immediate access to plaintext by 

  Federal, State, or local authorities.                                   

     (c) Closing of Proceedings.--(1) Upon motion of the party against    

  whom injunction is being sought--                                       

       (A) any or all of the proceedings under this section shall be closed

   to the public; and                                                      

       (B) public disclosure of the proceedings shall be treated as        

   contempt of court.                                                      

     (2) Upon a written finding by the court that public disclosure of    

  information relevant to the prosecution of the injunction or relevant to

  a determination of the factual or legal issues raised in the case would 

  cause irreparable or financial harm to the party against whom the suit  

  is brought, or would otherwise disclose proprietary information of any  

  party to the case, all proceedings shall be closed to members of the    

  public, except the parties to the suit, and all transcripts, motions,   

  and orders shall be placed under seal to protect their disclosure to the

  general public.                                                         

     (d) Advisory Opinion as Defense.--It is an absolute defense to a suit

  under this subsection that the party against whom suit is brought       

  obtained an advisory opinion from the Attorney General pursuant to      

  section 2804(c) and that the product at issue in the suit comports in   

  every aspect with the requirements announced in such advisory opinion.  

     (e) Basis for Permanent Injunction.--The court shall issue a         

  permanent injunction against the distribution of, and any future        

  manufacture of, the encryption product at issue in the suit filed under 

  subsection (a) if the court finds by a preponderance of the evidence    

  that the product does not meet the requirements set forth by the        

  Attorney General pursuant to section 2804 providing for immediate access

  to plaintext by Federal, State, or local authorities.                   

     (f) Appeals.--Either party may appeal, to the appellate court with   

  jurisdiction of the case, any adverse ruling by the district court      

  entered pursuant to this section. For the purposes of appeal, the       

  parties shall be governed by the Federal Rules of Appellate Procedure,  

  except that the Government shall file its notice of appeal not later    

  than 30 days after the entry of the final order on the docket of the    

  district court. The appeal of such matter shall be considered on an     

  expedited basis and resolved as soon as practicable.                    

          2806. Court order access to plaintext                                   



     (a) Court Order.--(1) A court of competent jurisdiction shall issue  

  an order, ex parte, granting an investigative or law enforcement officer

  immediate access to the plaintext of encrypted data, including          

  communications, or requiring any person in possession of decryption     

  information to provide such information to a duly authorized            

  investigative or law enforcement officer--                              



    (A) upon the application by an attorney for the Government that--      



       (i) is made under oath or affirmation by the attorney for the       

   Government; and                                                         

       (ii) provides a factual basis establishing the relevance that the   

   plaintext or decryption information being sought has to a law           

   enforcement or foreign counterintelligence investigation then being     

   conducted pursuant to lawful authorities; and                           

       (B) if the court finds, in writing, that the plaintext or decryption

   information being sought is relevant to an ongoing lawful law           

   enforcement or foreign counterintelligence investigation and the        

   investigative or law enforcement officer is entitled to such plaintext  

   or decryption information.                                              

     (2) The order issued by the court under this section shall be placed 

  under seal, except that a copy may be made available to the             

  investigative or law enforcement officer authorized to obtain access to 

  the plaintext of the encrypted information, or authorized to obtain the 

  decryption information sought in the application. Such order shall also 

  be made available to the person responsible for providing the plaintext 

  or the decryption information, pursuant to such order, to the           

  investigative or law enforcement officer.                               

     (3) Disclosure of an application made, or order issued, under this   

  section, is not authorized, except as may otherwise be specifically     

  permitted by this section or another order of the court.                

     (b) Other Orders.--An attorney for the Government may make           

  application to a district court of the United States for an order under 

  subsection (a), upon a request from a foreign country pursuant to a     

  Mutual Legal Assistance Treaty with such country that is in effect at   

  the time of the request from such country.                              

     (c) Record of Access Required.--(1) There shall be created an        

  electronic record, or similar type record, of each instance in which an 

  investigative or law enforcement officer, pursuant to an order under    

  this section, gains access to the plaintext of otherwise encrypted      

  information, or is provided decryption information, without the         

  knowledge or consent of the owner of the data, including communications,

  who is the user of the encryption product involved.                     

     (2) The court issuing the order under this section shall require that

  the electronic or similar type of record described in paragraph (1) is  

  maintained in a place and a manner that is not within the custody or    

  control of an investigative or law enforcement officer gaining the      

  access or provided the decryption information. The record shall be      

  tendered to the court, upon notice from the court.                      

     (3) The court receiving such electronic or similar type of record    

  described in paragraph (1) shall make the original and a certified copy 

  of the record available to the attorney for the Government making       

  application under this section, and to the attorney for, or directly to,

  the owner of the data, including communications, who is the user of the 

  encryption product.                                                     

     (d) Authority To Intercept Communications Not Increased.--Nothing in 

  this chapter shall be construed to enlarge or modify the circumstances  

  or procedures under which a Government entity is entitled to intercept  

  or obtain oral, wire, or electronic communications or information.      

     (e) Construction.--This chapter shall be strictly construed to apply 

  only to a Government entity's ability to decrypt data, including        

  communications, for which it has previously obtained lawful authority to

  intercept or obtain pursuant to other lawful authorities that would     

  otherwise remain encrypted.                                             

          2807. Notification procedures                                           



     (a) In General.--Within a reasonable time, but not later than 90 days

  after the filing of an application for an order under section 2806 which

  is granted, the court shall cause to be served, on the persons named in 

  the order or the application, and such other parties whose decryption   

  information or whose plaintext has been provided to an investigative or 

  law enforcement officer pursuant to this chapter as the court may       

  determine that is in the interest of justice, an inventory which shall  

  include notice of--                                                     

    (1) the fact of the entry of the order or the application;             



       (2) the date of the entry of the application and issuance of the    

   order; and                                                              

       (3) the fact that the person's decryption information or plaintext  

   data, including communications, have been provided or accessed by an    

   investigative or law enforcement officer.                               

    The court, upon the filing of a motion, may make available to that    

  person or that person's counsel, for inspection, such portions of the   

  plaintext, applications, and orders as the court determines to be in the

  interest of justice. On an ex parte showing of good cause to a court of 

  competent jurisdiction, the serving of the inventory required by this   

  subsection may be postponed.                                            

     (b) Admission Into Evidence.--The contents of any encrypted          

  information that has been obtained pursuant to this chapter or evidence 

  derived therefrom shall not be received in evidence or otherwise        

  disclosed in any trial, hearing, or other proceeding in a Federal or    

  State court unless each party, not less than 10 days before the trial,  

  hearing, or proceeding, has been furnished with a copy of the order, and

  accompanying application, under which the decryption or access to       

  plaintext was authorized or approved. This 10-day period may be waived  

  by the court if the court finds that it was not possible to furnish the 

  party with the information described in the preceding sentence within 10

  days before the trial, hearing, or proceeding and that the party will   

  not be prejudiced by the delay in receiving such information.           

     (c) Contempt.--Any violation of the provisions of this section may be

  punished by the court as a contempt thereof.                            

     (d) Motion To Suppress.--Any aggrieved person in any trial, hearing, 

  or proceeding in or before any court, department, officer, agency,      

  regulatory body, or other authority of the United States or a State may 

  move to suppress the contents of any decrypted data, including          

  communications, obtained pursuant to this chapter, or evidence derived  

  therefrom, on the grounds that --                                       

    (1) the plaintext was unlawfully decrypted or accessed;                



       (2) the order of authorization or approval under which it was       

   decrypted or accessed is insufficient on its face; or                   

       (3) the decryption was not made in conformity with the order of     

   authorization or approval.                                              



    Such motion shall be made before the trial, hearing, or proceeding    

  unless there was no opportunity to make such motion, or the person was  

  not aware of the grounds of the motion. If the motion is granted, the   

  plaintext of the decrypted data, including communications, or evidence  

  derived therefrom, shall be treated as having been obtained in violation

  of this chapter. The court, upon the filing of such motion by the       

  aggrieved person, may make available to the aggrieved person or that    

  person's counsel for inspection such portions of the decrypted          

  plaintext, or evidence derived therefrom, as the court determines to be 

  in the interests of justice.                                            

     (e) Appeal by United States.--In addition to any other right to      

  appeal, the United States shall have the right to appeal from an order  

  granting a motion to suppress made under subsection (d), or the denial  

  of an application for an order under section 2806, if the United States 

  attorney certifies to the court or other official granting such motion  

  or denying such application that the appeal is not taken for purposes of

  delay. Such appeal shall be taken within 30 days after the date the     

  order was entered on the docket and shall be diligently prosecuted.     

     (f) Civil Action for Violation.--Except as otherwise provided in this

  chapter, any person described in subsection (g) may in a civil action   

  recover from the United States Government the actual damages suffered by

  the person as a result of a violation described in that subsection,     

  reasonable attorney's fees, and other litigation costs reasonably       

  incurred in prosecuting such claim.                                     

     (g) Covered Persons.--Subsection (f) applies to any person whose     

  decryption information--                                                

       (1) is knowingly obtained without lawful authority by an            

   investigative or law enforcement officer;                               

       (2) is obtained by an investigative or law enforcement officer with 

   lawful authority and is knowingly used or disclosed by such officer     

   unlawfully; or                                                          

       (3) is obtained by an investigative or law enforcement officer with 

   lawful authority and whose decryption information is unlawfully used to 

   disclose the plaintext of the data, including communications.           

     (h) Limitation.--A civil action under subsection (f) shall be        

  commenced not later than 2 years after the date on which the unlawful   

  action took place, or 2 years after the date on which the claimant first

  discovers the violation, whichever is later.                            

     (i) Exclusive Remedies.--The remedies and sanctions described in this

  chapter with respect to the decryption of data, including               

  communications, are the only judicial remedies and sanctions for        

  violations of this chapter involving such decryptions, other than       

  violations based on the deprivation of any rights, privileges, or       

  immunities secured by the Constitution.                                 

     (j) Technical Assistance by Providers.--A provider of encryption     

  technology or network service that has received an order issued by a    

  court pursuant to this chapter shall provide to the investigative or law

  enforcement officer concerned such technical assistance as is necessary 

  to execute the order. Such provider may, however, move the court to     

  modify or quash the order on the ground that its assistance with respect

  to the decryption or access to plaintext cannot be performed in a timely

  or reasonable fashion. The court, upon notice to the Government, shall  

  decide such motion expeditiously.                                       

     (k) Reports to Congress.--In May of each year, the Attorney General, 

  or an Assistant Attorney General specifically designated by the Attorney

  General, shall report in writing to Congress on the number of           

  applications made and orders entered authorizing Federal, State, and    

  local law enforcement access to decryption information for the purposes 

  of reading the plaintext of otherwise encrypted data, including         

  communications, pursuant to this chapter. Such reports shall be         

  submitted to the Committees on the Judiciary of the House of            

  Representatives and of the Senate, and to the Permanent Select Committee

  on Intelligence for the House of Representatives and the Select         

  Committee on Intelligence for the Senate.                               

          2808. Lawful use of plaintext or decryption information                 



   (a)  Authorized Use of Decryption Information.--                       



       (1) Criminal investigations.--An investigative or law enforcement   

   officer to whom plaintext or decryption information is provided may use 

   such plaintext or decryption information for the purposes of conducting 

   a lawful criminal investigation or foreign counterintelligence          

   investigation, and for the purposes of preparing for and prosecuting any

   criminal violation of law.                                              

       (2) Civil redress.--Any plaintext or decryption information provided

   under this chapter to an investigative or law enforcement officer may   

   not be disclosed, except by court order, to any other person for use in 

   a civil proceeding that is unrelated to a criminal investigation and    

   prosecution for which the plaintext or decryption information is        

   authorized under paragraph (1). Such order shall only issue upon a      

   showing by the party seeking disclosure that there is no alternative    

   means of obtaining the plaintext, or decryption information, being      

   sought and the court also finds that the interests of justice would not 

   be served by nondisclosure.                                             

     (b) Limitation.--An investigative or law enforcement officer may not 

  use decryption information obtained under this chapter to determine the 

  plaintext of any data, including communications, unless it has obtained 

  lawful authority to obtain such data, including communications, under   

  other lawful authorities.                                               

     (c) Return of Decryption Information.--An attorney for the Government

  shall, upon the issuance of an order of a court of competent            

  jurisdiction--                                                          

       (1)(A) return any decryption information to the person responsible  

   for providing it to an investigative or law enforcement officer pursuant

   to this chapter; or                                                     

       (B) destroy such decryption information, if the court finds that the

   interests of justice or public safety require that such decryption      

   information should not be returned to the provider; and                 

       (2) within 10 days after execution of the court's order to destroy  

   the decryption information--                                            

       (A) certify to the court that the decryption information has either 

   been returned or destroyed consistent with the court's order; and       

       (B) notify the provider of the decryption information of the        

   destruction of such information.                                        

     (d) Other Disclosure of Decryption Information.--Except as otherwise 

  provided in section 2806, a key recovery agent may not disclose         

  decryption information stored with the key recovery agent by a person   

  unless the disclosure is--                                              

    (1) to the person, or an authorized agent thereof;                     



       (2) with the consent of the person, including pursuant to a contract

   entered into with the person;                                           

       (3) pursuant to a court order upon a showing of compelling need for 

   the information that cannot be accommodated by any other means if--     

       (A) the person who supplied the information is given reasonable     

   notice, by the person seeking the disclosure, of the court proceeding   

   relevant to the issuance of the court order; and                        

       (B) the person who supplied the information is afforded the         

   opportunity to appear in the court proceeding and contest the claim of  

   the person seeking the disclosure;                                      

       (4) pursuant to a determination by a court of competent jurisdiction

   that another person is lawfully entitled to hold such decryption        

   information, including determinations arising from legal proceedings    

   associated with the incapacity, death, or dissolution of any person; or 

       (5) otherwise permitted by a provision of this chapter or otherwise 

   permitted by law.                                                       

          2809. Identification of decryption information                          



     (a) Identification.--To avoid inadvertent disclosure, any person who 

  provides decryption information to an investigative or law enforcement  

  officer pursuant to this chapter shall specifically identify that part  

  of the material provided that discloses decryption information as such. 

     (b) Responsibility of Investigative or Law Enforcement Officer.--The 

  investigative or law enforcement officer receiving any decryption       

  information under this chapter shall maintain such information in       

  facilities and in a method so as to reasonably assure that inadvertent  

  disclosure does not occur.                                              

          2810. Unlawful export of certain encryption products                    



     Whoever, after January 31, 2000, knowingly exports an encryption     

  product that does not include features or functions providing duly      

  authorized persons immediate access to plaintext or immediate decryption

  capabilities, as required under law, shall be imprisoned for not more   

  than 5 years, fined under this title, or both.                          

          2811. Definitions                                                       



     The definitions set forth in section 101 of the Security and Freedom 

  through Encryption (``SAFE'') Act of 1997 shall apply to this chapter.  



         * * * * * * *                                                           





               ADDITIONAL VIEWS OF REPRESENTATIVES DICKS, SKELTON, AND BISHOP     



      In considering H.R. 695, we used six principles as a guide through   

   the difficult and complex issues posed by encryption technology.        

      First, Congress should take no action to impair or abridge the       

   rights, liberties, and privacy of the American people guaranteed by our 

   constitution.                                                           

      Second, Congress has an obligation to ensure that the ability of law 

   enforcement agencies to provide protection against violent criminals,   

   terrorists, narcotics dealers, organized crime syndicates, and espionage

   is not unwisely diminished.                                             

      Third, there is an equally compelling need to guarantee the          

   protection of electronic information for the security of the nation, for

   the privacy and protection of our citizens and their property, and for  

   the prosperity of the country through a new form of commerce.           

      Fourth, Congress must protect our ability to collect intelligence to 

   support national defense, diplomacy, and law enforcement.               

      Fifth, we must not disadvantage, and should as best we can promote,  

   American workers and companies seeking to maintain dominance in         

   information technologies.                                               

      Finally, our domestic and foreign policy in this area should, to the 

   maximum extent possible, be consistent and reinforcing.                 

      It is commonly asserted that these principles are substantially at   

   odds with one another, such that any consistent policy position must    

   entail compromises among them--perhaps fatal ones. We do not believe    

   that is true and am convinced that the substitute the Committee adopted 

   is faithful to all these principles.                                    

      In contrast, H.R. 695 as referred to the Committee is in conflict    

   with several of the foregoing principles. H.R. 695 is incompatible with 

   national security because it essentially does away with the export      

   control process. Gutting the export control process would also have     

   serious foreign policy consequences, undermining administration attempts

   to develop an international consensus on encryption policy and perhaps  

   prompting other countries to erect import barriers to U.S. encryption   

   products and associated hardware and software systems. The bill would do

   nothing to foster a domestic key management infrastructure, which the   

   administration, the Committee, and much of industry believe is important

   for the rapid expansion of electronic commerce. The bill is deficient   

   also in that it would not help law enforcement overcome the negative    

   consequences of the inevitable proliferation of strong encryption.      

      Without legislative intervention, in the near future the nation's    

   police departments and the FBI will not need to bother to install       

   wiretaps because everything they hear will be encrypted. Proponents of  

   H.R. 695 as referred to the Committee acknowledge this problem but argue

   that the law enforcement interest is a narrow one and should be         

   sacrificed. Others assert that it is futile to try to protect law       

   enforcement equities either because unbreakable encryption will         

   proliferate no matter what the government does, or that any government  

   regulatory actions will do much more harm than good. With regard to     

   export controls, proponents of H.R. 695 contend that without an         

   inclusive international compact to regulate encryption, it is pointless,

   crippling to U.S. industry, to maintain a rigid export control regime.  

   They assert that there is no reason to believe that any international   

   consensus is likely, and that U.S. industry already faces an imminent   

   competitive threat.                                                     

      We reject these arguments. Communications intercepts are a critically

   important and effective law enforcement tool. While it is true that the 

   government cannot hope to prevent determined and resourceful criminals, 

   terrorists, and others from using unbreakable encryption to hide their  

   activities, these elements must interact with society at large, and     

   therefore must conduct most of their business using standard forms of   

   electronic commerce and communication. If the latter provide lawful     

   access to the plaintext of encrypted information, or to decryption      

   information pursuant to court order, law enforcement will be able to    

   conduct investigations effectively. Thus it is neither necessary nor    

   expected that the Committee substitute would eradicate unapproved       

   encryption capabilities.                                                

      In terms of the practicality of regulating encryption products, we   

   recognize also that it is not a certainty that the burden the substitute

   would place on the marketplace to provide some form of access for       

   communications will prove to be marginally costly or inconvenient. We   

   acknowledge the possibility that critics could be right--that these     

   requirements will be unwieldy or expensive, or both. But it is far from 

   clear today that the critics are right, and the administration predicts 

   modest annual user costs. If the law is to err, however, we strongly    

   favor doing it on the side of ensuring that our public safety and       

   national security officials can continue to do their jobs effectively.  

      We recognize that there is no certainty of success in the attempt to 

   convince the other advanced nations of the need to control encryption to

   protect law enforcement as we propose to do. The United States cannot   

   hope to convince others to take this path, however, if it decides first 

   to flood the world with unbreakable encryption, and second to proclaim  

   that domestic controls are somewhat incompatible with liberty.          

      Furthermore, any fair assessment of the status of discussions with   

   other advanced nations on this issue would conclude that success is     

   quite feasible. Similarly, claims about the availability of truly strong

   encryption products on the world market that users can readily access   

   and employ are clearly exaggerated. Finally, as the section-by-section  

   analysis in this report explains, the Committee substitute provides for 

   the export of encryption products with an access ``on-off switch,'' in  

   effect allowing industry to export unbreakable encryption to countries  

   that have no requirement for law enforcement access to plaintext.       

      Critics also assert that it is unreasonable for Congress to consider 

   levying a mandate on the private sector in information technology to    

   provide a means for lawful access to encrypted information. In fact,    

   there is an important precedent for such action. Just a few years ago,  

   law enforcement agencies were similarly faced with the prospect of      

   loosing the ability to intercept communications because of the          

   astonishing complexity of the nation's emerging digital                 

   telecommunications networks--even when the underlying information is    

   unencrypted. Congress met the political challenge of supporting law     

   enforcement in this instance by requiring communications service        

   providers to install capabilities to permit effective wiretaps. This    

   digital telephony act also required telephone communications service    

   providers to provide access to plaintext to duly authorized law         

   enforcement agencies where the service providers offered their customers

   encryption capabilities that could be decrypted. The point is that      

   Congress was willing to do what was right when the issue was clear.     

      We face another such challenge today. We believe that my colleagues  

   will respond appropriately once they realize what is at stake. The place

   to start that educational process is here, with the Committee           

   substitute. We do not think that a fair analysis of the substitute could

   conclude that it would compromise the rights of our citizens by         

   insisting that law enforcement agencies merely retain their current     

   ability to gather evidence through judicially sanctioned electronic     

   surveillance.                                                           



     Norm Dicks.                                                            



     Ike Skelton.                                                           



     Sanford D. Bishop,  Jr.                                                





                ADDITIONAL VIEWS OF REPRESENTATIVES HARMAN, SKAGGS, AND DIXON     



      The issue of encryption is one of the most difficult we have faced in

   our careers in the Congress. The technical complexities of algorithms   

   and bit strength are the least of the problem. What is most challenging 

   is discovering a way to balance competing policy concerns in the face of

   a rapidly evolving electronic infrastructure.                           

      We are convinced that H.R. 695 as introduced and reported from the   

   Committees on Judiciary and International Relations is neither the right

   answer, nor a comprehensive approach to the challenges we face. As      

   members of the Permanent Select Committee on Intelligence we believe    

   U.S. policy should balance sometimes conflicting goals: protecting      

   public computer networks from the threats of terrorists and other       

   criminals through the use of strong encryption; promoting the economic  

   competitiveness and the research and development breakthroughs of our   

   vital information technology industry; encouraging the legal framework  

   necessary for robust and reliable electronic commerce; and helping      

   preserve public safety and national security.                           

      H.R. 695 as introduced was intended to promote economic              

   competitiveness but it does little to address the strongly expressed    

   concerns of law enforcement officials from around the country that the  

   legislation would eliminate the possibility of electronic surveillance  

   under lawful court order.                                               

      The substitute the Committee has ordered reported is an attempt to   

   address all of the issues in the debate comprehensively. Yet, it has    

   been developed under an extremely short time frame, subject to a limited

   referral. We believe the legislation is too sweeping, particularly in   

   placing new requirements on the manufacture, sale, and import of        

   encryption products in the United States.                               

      While we want United States law enforcement and national security    

   agencies, working under proper oversight, to have the tools they need to

   respond to threats to the public safety and national security, the      

   requirement in the legislation that encryption products manufactured and

   distributed for sale or use, or imported for sale or use after January  

   31, 2000, include features or functions that provide, upon presentment  

   of a court order, immediate access to plaintext data or decryption      

   information from the encryption provider, raises a host of new questions

   and issues that need further exploration. We are worried less about the 

   narrow question of technical feasibility than how such a requirement    

   would implicate valid concerns about privacy, abuse of official         

   authority, and the inherent security of data security services. We are  

   concerned whether the legislation's provision on imports might be       

   interpreted to mean an individual on the Internet downloading encryption

   from a foreign country was violating the law and about where the line   

   would be drawn on the prohibited distribution of encryption products not

   meeting the bill's legal requirements.                                  

      The substitute is intended to put in place a legal framework for, and

   safeguards on, law enforcement access to encrypted electronic           

   information. This is positive. Imposing new criminal penalties for the  

   invasion of privacy relating to the misuse of decryption information is 

   appropriate to ensure that government officials who gain access to      

   information on the electronic network do not exceed their lawful        

   authority. Likewise, we support requiring a verifiable audit trail      

   whenever government officials obtain access to plaintext and decrypted  

   information, regardless of whether or not a recovery-capable mandate on 

   encryption is enacted. We are fast approaching what Kenneth Flamm of the

   Brookings Institution calls ``a digital future in which almost          

   everything * * * is stored or communicated electronically, connected to 

   or accessible through some computer network.'' It is time to take action

   on these issues.                                                        

      In addition, we recognize that the issues raised in this debate are  

   international in scope. Given the availability of encryption technology 

   abroad, and the ease of its dissemination, a unilateral export control  

   policy on encryption will not work. Therefore, we must encourage, if not

   direct, the Administration to monitor closely international developments

   and to engage other countries in working out a multilateral approach to 

   this issue.                                                             

      Recent events suggest passage of H.R. 695 as originally conceived is 

   highly unlikely in the House of Representatives. We believe there now   

   needs to be a very careful and deliberative effort to fashion balanced  

   legislation. The information technology industry should suggest targeted

   legislative and regulatory amendments which will meet its need for fewer

   uncertainties in the export control process, while still allowing for   

   regulatory flexibility as technology advances. Privacy advocates should 

   recognize that government access to information residing on the         

   electronic infrastructure in order to protect public safety is          

   legitimate within reasonable constraints, and should propose what those 

   reasonable constraints should be. Law enforcement officials should      

   carefully evaluate where their highest priorities lie in protecting the 

   public safety and preventing crime. The Administration should redouble  

   its efforts to secure international agreements of mutual recognition of 

   encryption management infrastructures to safeguard the privacy of United

   States citizens and enhance U.S. information security needs in          

   electronic commerce. Continued stalemate on balancing the competing     

   policy concerns is not in the interests of industry, law enforcement or 

   the American people.                                                    



    Jane Harman.                                                            



    David E. Skaggs.                                                        



    Julian C. Dixon.                                                        





                       ADDITIONAL VIEWS OF REPRESENTATIVE NANCY PELOSI            



      I oppose the substitute to H.R. 695 ordered reported from the        

   Permanent Select Committee on Intelligence. While there are indeed      

   serious national security and law enforcement issues at stake in this   

   debate, there are also serious questions about the impact of this       

   legislation on the civil liberties on which this nation is based. A     

   balance must be struck. The bill passed by the Committee does not strike

   the requisite balance.                                                  

      I was very concerned about the lack of an audit mechanism in the     

   Committee's substitute as proposed and am pleased that the bill was     

   amended to require an electronic audit trail, to ensure that there is   

   accountability when an investigative or law enforcement officer obtains 

   access to the plaintext of otherwise encrypted information or the       

   provision of decryption information.                                    

   Among the reasons I oppose the bill are the following:                  



      With respect to domestic controls, the ramifications of enacting a   

   requirement that encryption products manufactured, distributed or       

   imported in the United States after January 2000 contain features that  

   provide, upon presentment of a court order, immediate plaintext access  

   or decryption information, are not well understood. It is not clear such

   a requirement could pass constitutional muster, particularly where it   

   might place restrictions on the distribution of encryption algorithms or

   the free flow of ideas among scientists working in the area of          

   information technology. Indeed imposing domestic controls runs counter  

   to the first recommendation of the National Research Council's          

   widely-respected CRISIS report (``Cryptography's Role in Security in the

   Information Society,'' June 1996) that no law bar the manufacture, sale 

   or use of any form of encryption in the United States. Despite the many 

   provisions of the legislation designed to place civil and criminal      

   penalties on official misuse of decryption information, and provide     

   privacy protections to those who encrypt information, further debate is 

   needed on whether the legal framework governing lawful wiretaps is the  

   appropriate model for the 21st Century as so much information concerning

   our personal and economic lives is connected and accessible on-line.    

      With respect to export controls, the legislation would force U.S.    

   manufacturers to include features that could provide plaintext access or

   decryption information in encryption products exported overseas.        

   Although the legislation allows these features to be enabled at the     

   foreign purchaser's option, and does not require any keys or recovery   

   information be held in escrow in the United States, demanding recovery  

   capable features in exportable U.S. technology may provide repressive   

   totalitarian regimes a new method of control over dissidents and human  

   rights advocates who today evade surveillance by utilizing unbreakable  

   encryption on the Internet.                                             

      Also of concern is the impact of certain of the substitute's         

   provisions on human rights activists in authoritarian countries. Human  

   rights activists worldwide are using cryptography to protect their      

   sources from reprisals by governments that violate human rights. Under  

   the Committee substitute, the U.S. government can get a court order for 

   violating the security of communications ``upon a request from a foreign

   country pursuant to a Mutual Legal Assistance Treaty.'' This provision  

   will permit governments to breach the protection of confidential        

   sources, thereby both endangering human rights activists using          

   electronic communications and discouraging people who know of human     

   rights violations to speak about them, even in private. Authoritarian   

   governments often define the activities of those who dare to speak out  

   against them as ``treason'' or ``revealing classified information,''    

   crimes recognized by the U.S. government. Under the Committee           

   substitute, legitimate human rights activists, who now communicate      

   safely through the Internet with strong encryption protection, will no  

   longer have that safety.                                                

      In addition, the legislation enshrines the broad concept that all    

   decisions of the Secretary of Commerce with respect to the export of    

   encryption products are not subject to judicial review. If the question 

   at hand has to do with national security implications, the President    

   could waive judicial review on a case-by-case basis as needed, rather   

   than Congress acting to grant a blanket waiver of a citizen's right to  

   recourse to the legal system.                                           

      The serious issues involving national security and public safety     

   could have been resolved with a more narrowly targeted approach. I hope 

   efforts will be made to craft a consensus measure before H.R. 695 is    

   considered on the floor of the House of Representatives.                



         Nancy Pelosi.                                                          





             LETTERS FROM LAW ENFORCEMENT OFFICERS AND THE SECRETARY OF DEFENSE   



       The Secretary of Defense,                                               



       Washington, DC, July 21, 1997.                                          



       Dear Member of Congress: Recently you received a letter from the    

   nation's senior law enforcement officials regarding U.S. encryption     

   policies. I am writing today to express my strong support for their     

   views on their important issue.                                         

      As you know, the Department of Defense is involved on a daily basis  

   in countering international terrorism, narcotics trafficking, and the   

   proliferation of weapons of mass destruction. The spread of unbreakable 

   encryption, as a standard feature of mass market communication products,

   presents a significant threat to the ability of the U.S. and its allies 

   to monitor the dangerous groups and individuals involved in these       

   activities. Passage of legislation which effectively decontrols         

   commercial encryption exports would undermine U.S. efforts to foster the

   use of strong key recovery encryption domestically and abroad. Key      

   recovery products will preserve governments' abilities to counter       

   worldwide terrorism, narcotics trafficking and proliferation.           

      It is also important to note that the Department of Defense relies on

   the Federal Bureau of Investigation for the apprehension and prosecution

   of spies. Sadly, there have been over 60 espionage convictions of       

   federal employees over the last decade. While these individuals         

   represent a tiny minority of government employees, the impact of        

   espionage activities on our nation's security can be enormous. As the   

   recent arrests of Nicholson, Pitts and Kim clearly indicate, espionage  

   remains a very serious problem. Any policies that detract from the FBI's

   ability to perform its vital counterintelligence function, including the

   ability to perform wiretaps, inevitably detract from the security of the

   Department of Defense and the nation.                                   

      Encryption legislation must also address the nation's domestic       

   information security needs. Today, approximately 95% of DoD             

   communications rely on public networks; other parts of government, and  

   industry, are even more dependent on the trustworthiness of such        

   networks. Clearly, we must ensure that encryption legislation addresses 

   these needs. An approach such as the one contained in S. 909 can go a   

   long way toward balancing the need for strong encryption with the need  

   to preserve national security and public safety. I hope that you will   

   work with the Administration to enact legislation that addresses these  

   national security concerns as well as the rights of the American people.

   I appreciate your consideration of these views.                         



   Sincerely,                                                              



         Bill Cohen.                                                            



                                                                                 





       Office of the Attorney General,                                         



       Washington, DC, July 18, 1997.                                          



       Dear Member of Congress: Congress is considering a variety of       

   legislative proposals concerning encryption. Some of these proposals    

   would, in effect, make it impossible for the Federal Bureau of          

   Investigation (FBI), Drug Enforcement Administration (DEA), Secret      

   Service, Customs Service, Bureau of Alcohol, Tobacco and Firearms, and  

   other federal, state, and local law enforcement agencies to lawfully    

   gain access to criminal telephone conversations or electronically stored

   evidence possessed by terrorists, child pornographers, drug kingpins,   

   spies and other criminals. Since the impact of these proposals would    

   seriously jeopardize public safety and national security, we            

   collectively urge you to support a different, balanced approach that    

   strongly supports commercial and privacy interests but maintains our    

   ability to investigate and prosecute serious crimes.                    

      We fully recognize that encryption is critical to communications     

   security and privacy, and that substantial commercial interests are at  

   stake. Perhaps in recognition of these facts, all the bills being       

   considered allow market forces to shape the development of encryption   

   products. We, too, place substantial reliance on market forces to       

   promote electronic security and privacy, but believe that we cannot rely

   solely on market forces to protect the public safety and national       

   security. Obviously, the government cannot abdicate its solemn          

   responsibility to protect public safety and national security.          

      Currently, of course, encryption is not widely used, and most data is

   stored, and transmitted, in the clear. As we move from a plaintext world

   to an encrypted one, we have a critical choice to make: we can either   

   (1) choose robust, unbreakable encryption that protects commerce and    

   privacy but gives criminals a powerful new weapon, or (2) choose robust,

   unbreakable encryption that protects commerce and privacy and gives law 

   enforcement the ability to protect public safety. The choice should be  

   obvious and it would be a mistake of historic proportions to do nothing 

   about the dangers to public safety posed by encryption without adequate 

   safeguards for law enforcement.                                         

      Let there be no doubt: without encryption safeguards, all Americans  

   will be endangered. No one disputes this fact; not industry, not        

   encryption users, no one. We need to take definitive actions to protect 

   the safety of the public and security of the nation. That is why law    

   enforcement at all levels of government--including the Justice          

   Department, Treasury Department, the National Association of Attorneys  

   General, International Association of Chiefs of Police, the Major City  

   Chiefs, the National Sheriffs' Association, and the National District   

   Attorneys Association--are so concerned about this issue.               

      We all agree that without adequate legislation, law enforcement in   

   the United States will be severely limited in its ability to combat the 

   worst criminals and terrorists. Further, law enforcement agrees that the

   widespread use of robust non-key recovery encryption ultimately will    

   devastate our ability to fight crime and prevent terrorism.             

      Simply stated, technology is rapidly developing to the point where   

   powerful encryption will become commonplace both for routine telephone  

   communications and for stored computer data. Without legislation that   

   accommodates public safety and national security concerns, society's    

   most dangerous criminals will be able to communicate safely and         

   electronically store data without fear of discovery. Court orders to    

   conduct electronic surveillance and court-authorized search warrants    

   will be ineffectual, and the Fourth Amendment's carefully-struck balance

   between ensuring privacy and protecting public safety will be forever   

   altered by technology. Technology should not dictate public policy, and 

   it should promote, rather than defeat, public safety.                   

      We are not suggesting the balance of the Fourth Amendment be tipped  

   toward law enforcement either. To the contrary, we only seek the status 

   quo, not the lessening of any legal standard or the expansion of any law

   enforcement authority. The Fourth Amendment protects the privacy and    

   liberties of our citizens but permits law enforcement to use tightly    

   controlled investigative techniques to obtain evidence of crimes. The   

   result has been the freest country in the world with the strongest      

   economy.                                                                

      Law enforcement has already confronted encryption in high-profile    

   espionage, terrorist, and criminal cases. For example:                  

       An international terrorist was plotting to blow up 11 U.S.-owned    

   commercial airliners in the Far East. His laptop computer, which was    

   seized in Manila, contained encrypted files concerning this terrorist   

   plot;                                                                   

       A subject in a child pornography case used encryption in            

   transmitting obscene and pornographic images of children over the       

   Internet; and                                                           



       A major international drug trafficking subject recently used a      

   telephone encryption device to frustrate court-approved electronic      

   surveillance.                                                           

    And this is just the tip of the iceberg. Convicted spy Aldrich Ames,  

  for example, was told by the Russian Intelligence Service to encrypt    

  computer file information that was to be passed to them.                

      Further, today's international drug trafficking organizations are the

   most powerful, ruthless and affluent criminal enterprises we have ever  

   faced. We know from numerous past investigations that they have utilized

   their virtually unlimited wealth to purchase sophisticated electronic   

   equipment to facilitate their illegal activities. This has included     

   state of the art communication and encryption devices. They have used   

   this equipment as part of their command and control process for their   

   international criminal operations. We believe you share our concern that

   criminals will increasingly take advantage of developing technology to  

   further insulate their violent and destructive activities.              



      Requests for cryptographic support pertaining to electronic          

   surveillance interceptions from FBI Field Offices and other law         

   enforcement agencies have steadily risen over the past several years.   

   There has been an increase in the number of instances where the FBI's   

   and DEA's court-authorized electronic efforts were frustrated by the use

   of encryption that did not allow for law enforcement access.            

      There have also been numerous other cases where law enforcement,     

   through the use of electronic surveillance, has not only solved and     

   successfully prosecuted serious crimes but has also been able to prevent

   life-threatening criminal acts. For example, terrorists in New York were

   plotting to bomb the United Nations building, the Lincoln and Holland   

   Tunnels, and 26 Federal Plaza as well as conduct assassinations of      

   political figures. Court-authorized electronic surveillance enabled the 

   FBI to disrupt the plot as explosives were being mixed. Ultimately, the 

   evidence obtained was used to convict the conspirators. In another      

   example, electronic surveillance was used to stop and then convict two  

   men who intended to kidnap, molest, and kill a child. In all of these   

   cases, the use of encryption might have seriously jeopardized public    

   safety and resulted in the loss of life.                                

      To preserve law enforcement's abilities, and to preserve the balance 

   so carefully established by the Constitution, we believe any encryption 

   legislation must accomplish three goals in addition to promoting the    

   widespread use of strong encryption. It must establish:                 

       A viable key management infrastructure that promotes electronic     

   commerce and enjoys the confidence of encryption users;                 

       A key management infrastructure that supports a key recovery scheme 

   that will allow encryption users access to their own data should the    

   need arise, and that will permit law enforcement to obtain lawful access

   to the plaintext of encrypted communications and data; and              

       An enforcement mechanism that criminalizes both improper use of     

   encryption key recovery information and the use of encryption for       

   criminal purposes.                                                      

      Only one bill, S. 909 (the McCain/Kerrey/Hollings bill), comes close 

   to meeting these core public safety, law enforcement, and national      

   security needs. The other bills being considered by Congress, as        

   currently written, risk great harm to our ability to enforce the laws   

   and protect our citizens. We look forward to working to improve the     

   McCain/Kerrey/Hollings bill.                                            

      In sum, while encryption is certainly a commercial interest of great 

   importance to this Nation, it is not solely a commercial or business    

   issue. Those of us charged with the protection of public safety and     

   national security, believe that the misuse of encryption                



    technology will become a matter of life and death in many instances.  

  That is why we urge you to adopt a balanced approach that accomplishes  

  the goals mentioned above. Only this approach will allow police         

  departments, attorneys general, district attorneys, sheriffs, and       

  federal authorities to continue to use their most effective             

  investigative techniques, with court approval, to fight crime and       

  espionage and prevent terrorism.                                        

   Sincerely yours,                                                        



    Janet Reno,                                                             



      Attorney General.                                                      



    Louis Freeh,                                                            



      Director, Federal Bureau of Investigation.                             



    Thomas A. Constantine,                                                  



      Director, Drug Enforcement Administration.                             



    Raymond W. Kelly,                                                       



      Undersecretary for Enforcement, U.S. Department of the Treasury.       



    John W. Magaw,                                                          



      Director, Bureau of Alcohol, Tobacco and Firearms.                     



    Barry McCaffrey,                                                        



      Director, Office of National Drug Control Policy.                      



    Lewis C. Merletti,                                                      



      Director, United States Secret Service.                                



    George J. Weise,                                                        



      Commissioner, United States Customs Service.                           



                                                                                 





       International Association of                                            



       Chiefs of Police,                                                       



       Alexandria, VA, July 21, 1997.                                          



       Dear Member of Congress: Enclosed is a letter sent to you by the    

   Attorney General, the Director of National Drug Control Policy and all  

   the federal law enforcement heads concerning encryption legislation     

   being considered by congress. Collectively we, the undersigned,         

   represent over 17,000 police departments including every major city     

   police department, over 3,000 sheriffs departments, nearly every        

   district attorney in the United States and all of the state Attorneys   

   General. We fully endorse the position taken by our federal counterparts

   in the enclosed letter. As we have stated many times, Congress must     

   adopt a balanced approach to encryption that fully addresses public     

   safety concerns or the ability of state and local law enforcement to    

   fight crime and drugs will be severely damaged.                         

      Any encryption legislation that does not ensure that law enforcement 

   can gain timely access to the plaintext of encrypted conversations and  

   information by established legal procedures will cause grave harm to    

   public safety. The risk cannot be left to the uncertainty of market     

   forces or commercial interests as the current legislative proposals     

   would require. Without adequate safeguards, the unbridled use of        

   powerful encryption soon will deprive law enforcement of two of its most

   effective tools, court authorized electronic surveillance and the search

   and seizure of information stored in computers. This will substantially 

   tip the balance in the fight against crime towards society's most       

   dangerous criminals as the information age develops.                    

      We are in unanimous agreement that congress must adopt encryption    

   legislation that requires the development, manufacture, distribution and

   sale of only key recovery products and we are opposed to the bills that 

   do not do so. Only the key recovery approach will ensure that law       

   enforcement can continue to gain timely access to the plaintext of      

   encrypted conversations and other evidence of crimes when authorized by 

   a court to do so. If we lose this ability--and the bills you are        

   considering will have this result--it will be a substantial setback for 

   law enforcement at the direct expense of public safety.                 

   Sincerely yours,                                                        



    Darrell L. Sanders,                                                     



      President, International Association of Chiefs of Police.              



    James E. Doyle,                                                         



      President, National Association of Attorneys General.                  



    Fred Scoralie,                                                          



      President, National Sheriffs' Association.                             



    William L. Murphy,                                                      



      President, National District Attorneys Association.                    



                                                                                 





       Major Cities Chiefs,                                                    



       Chicago IL,  July 24, 1997.                                             







          Hon.  Orrin G. Hatch,                 Chairman, Judiciary Committee, Senate Hart Office Building, Washington, DC. 



       Dear Mr. Chairman: The Major Cities Chiefs is a professional        

   association of police executives representing the largest jurisdictions 

   in the United States. The association provides a forum for urban police 

   chiefs, sheriffs and other law enforcement chief executives to discuss  

   common problems associated with protecting cites with populations       

   exceeding 500,000 people.                                               

      Congress is considering a variety of legislative proposals concerning

   encryption. Some of these proposals would, in effect, make it impossible

   for law enforcement agencies across the country, both on the federal,   

   state and local level, to lawfully gain access to criminal telephone    

   conversations or electronically stored evidence. Since the impact of    

   these proposals would seriously jeopardize public safety, our           

   association urges you to support a balanced approach that strongly      

   supports commercial and private interests but also maintains law        

   enforcements ability to investigate and prosecute serious crime.        

      While we recognize that encryption is critical to communications     

   security and privacy and that commercial interests are at stake, we all 

   agree that without adequate legislation, law enforcement across the     

   country will be severely limited in its ability to combat serious crime.

   The widespread use of non-key recovery encryption ultimately will       

   eliminate our ability to obtain valuable evidence of criminal activity. 

   The legitimate and lawful interception of communications, pursuant to a 

   court order, for the most serious criminal acts will be meaningless     

   because of our inability to decipher the evidence.                      

      Encryption is certainly of great importance to the commercial        

   interests across this country. However, public safety concerns are just 

   as critical and we must not loose sight of this. The need to preserve an

   invaluable investigative tool is of the utmost importance in law        

   enforcements ability to protect the public against serious crime.       

   Sincerely yours,                                                        



         Matt L. Rodriguez,  Chairman.                                          



                                                                                 



       National District                                                       



       Attorneys Association,                                                  



       Alexandria, VA.                                                         



                                         RESOLUTION                               



                                Encryption                               



      Whereas, the introduction of digitally-based telecommunications      

   technologies as well as the widespread use of computers and computer    

   networks having encryption capabilities are facilitating the development

   and production of strong, affordable encryption products and services   

   for private sector use; and                                             

      Whereas, on one hand the use of strong encryption products and       

   services are extremely beneficial when used legitimately to protect     

   commercially sensitive information and communications. On the other     

   hand, the potential use of strong encryption products and services that 

   do not allow for timely law enforcement decryption by a vast array of   

   criminals and terrorist to conceal their criminal communications and    

   information from law enforcement poses an extremely serious threat to   

   public safety: and                                                      

      Whereas, the law enforcement community is extremely concerned about  

   the serious threat posed by the use of these strong encryption products 

   and services that do not allow for authorization (court-authorized      

   wiretaps or court-authorized search and seizure); and                   

      Whereas, law enforcement fully supports a balanced encryption policy 

   that satisfies both the commercial needs of industry for strong         

   encryption while at the same time satisfying law enforcement's public   

   safety needs for the timely decryption of encrypted criminal            

   communications and information; and                                     

      Whereas, law enforcement has found that strong key recovery          

   encryption products and services are clearly the best way, and perhaps  

   the only way, to achieve both the goals of industry and law enforcement;

   and                                                                     

      Whereas, government representatives have been working with industry  

   to encourage the voluntary development, sale, and use of key recovery   

   encryption products and services in its pursuit of a balanced encryption

   policy;                                                                 

       Be it resolved, That the National District Attorneys Association    

   supports and encourages the development and adoption of a balanced      

   encryption policy that encourages the development, sale, and use of key 

   recovery encryption products and services, both domestically and abroad.

   We believe that this approach represents a policy that appropriately    

   addresses both the commercial needs of industry while at the same time  

   satisfying law enforcement's public safety needs.                       

                                                                                 





                                         ENCRYPTION                               



      Whereas, the introduction of digitally-based telecommunications      

   technologies, as well as the widespread use of computers and computer   

   networks having encryption capabilities are facilitating the development

   and production of affordable and robust encryption products for private 

   sector use; and                                                         

      Whereas, on one hand encryption is extremely beneficial when used    

   legitimately to protect commercially sensitive information and          

   communications. On the other hand, the potential use of such encryption 

   products by a vast array of criminals and terrorists to conceal their   

   criminal communications and information from law enforcement poses an   

   extremely serious threat to public safety; and                          

      Whereas, the law enforcement community is extremely concerned about  

   the serious threat posed by the use of robust encryption products that  

   do not allow for law enforcement access and its timely decryption,      

   pursuant to lawful authorization (court-authorized wiretaps or          

   court-authorized search and seizure); and                               

      Whereas, law enforcement fully supports a balanced encryption policy 

   that satisfies both the commercial needs of industry for robust         

   encryption while at the same time satisfying law enforcement's public   

   safety needs; and                                                       

      Whereas, law enforcement has found that robust key-escrow encryption 

   is clearly the best way, and perhaps the only way, to achieve both the  

   goals of industry and law enforcement; and                              

      Whereas, government representatives have been working with industry  

   to encourage the voluntary development, sale, and use of key-escrow     

   encryption in its pursuit of a balanced encryption policy: Now,         

   therefore, be it                                                        

       Resolved, that the International Association of Chiefs of Police,   

   duly assembled at its 103rd annual conference in Phoenix, Arizona       

   supports and encourages the development and adoption of a key-escrow    

   encryption policy, which we believe represents a policy that            

   appropriately addresses both the commercial needs of industry while at  

   the same time satisfying law enforcement's public safety needs and that 

   we oppose any efforts, legislatively or otherwise, that would undercut  

   the adoption of such a balanced encryption policy.                      

                                                                                 



       National Sheriffs' Association                                          



       Chiefs of Police,                                                       



                                         RESOLUTION                               



                  DIGITAL TELECOMMUNICATIONS ENCRYPTION                  



      Whereas, the introduction of digitally-based telecommunications      

   technologies as well as the widespread use of computers and computer    

   networks having encryption capabilities are facilitating the development

   and production of affordable and robust encryption products for private 

   sector use: and                                                         

      Whereas, on one hand, encryption is extremely beneficial when used   

   legitimately to protect commercially sensitive information and          

   communications. On the other hand, the potential use of such encryption 

   products by a vast array of criminals and terrorists to conceal their   

   criminal communications and information from law enforcement poses an   

   extremely serious threat to public safety; and                          

      Whereas, the law enforcement community is extremely concerned about  

   the serious threat posed by the use of robust encryption products that  

   do not allow for court authorized law enforcement access and its timely 

   decryption, pursuant to lawful authorization; and                       

      Whereas, law enforcement fully supports a balanced encryption policy 

   that satisfies both the commercial needs of industry for robust         

   encryption while at the same time satisfying law enforcement's public   

   safety needs; and                                                       

      Whereas, law enforcement has found that robust key-escrow encryption 

   is clearly the best way, and perhaps the only way, to achieve both the  

   goals of industry and law enforcement; and                              

      Whereas, government representatives have been working with industry  

   to encourage the voluntary development, sale and use of key-escrow      

   encryption in its pursuit of a balanced encryption policy; and          

   therefore, be it                                                        

       Resolved That the National Sheriffs' Association supports and       

   encourages the development and adoption of a key-escrow encryption      

   policy which we believe represents a policy that appropriately addresses

   both the commercial needs of industry while at the same time satisfying 

   law enforcement's public safety needs and that we oppose any efforts,   

   legislatively or otherwise, that would undercut the adoption of such a  

   balanced encryption policy.                                             

                                                                                 





                                                                                  





       Imperial County Sheriff,                                                



       Coroner's Office,                                                       



       El Centro, CA, August 26, 1997.                                         



        Re Key recovery of encrypted data.                                     









          Hon.  Porter J. Goss,                 Chairman, Permanent Select Committee on Intelligence, Washington, DC.



       Dear Chairman Goss: I join my associates in Federal law enforcement,

   as well as the International Association of Chiefs of Police, the       

   National Sheriff's Association, and the National District Attorney's    

   Association, in urging you to make provisions for key recovery of       

   encrypted data. Both of you and your Committee are familiar with the    

   technology and the issues, and I won't waste your time or attention in a

   lengthy discourse on what encryption or key recovery is. You know as    

   much about the technology as I do.                                      

      Of particular interest to me is the ability of international drug    

   cartels to thwart legitimate, court-sanctioned interception of criminal 

   communications here along the border. Drug trafficking organizations are

   sophisticated, aggressive, and well-funded. They certainly are taking   

   advantage today of encryption technology in our own country. Without    

   provisions for key recovery, it will be virtually impossible for law    

   enforcement to conduct criminal investigations of telecommunications    

   activity or electronic data files. A simple solution is to require a    

   provision in trade agreements which requires a trustworthy key agent to 

   maintain the key to encrypted data. Such a requirement would still allow

   legitimate safeguarding of data, but would also allow law enforcement to

   crack coded information in criminal investigations and national security

   matters.                                                                

      I would be pleased to discuss this vital matter with you and I will  

   be appreciative of any consideration you may give this issue.           

   Sincerely,                                                              



         Oren R. Fox,  Sheriff-Coroner.