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Sun Sells Encryption Software Overseas, Skirting U.S. Policy
Tomorrow's Wall Street Journal:
http://interactive3.wsj.com/edition/current/articles/SB863997652645676500.htm
Sun Sells Encryption Software
Overseas, Skirting U.S. Policy
By DAVID BANK
Staff Reporter of THE WALL STREET JOURNAL
MOUNTAIN VIEW, Calif. -- Sun
Microsystems Inc. plans to sell advanced
data-security software from a Russian
supplier to overseas customers, a move that
skirts U.S. export regulations and is likely to
receive close U.S. government scrutiny.
Sun is expected to announce Monday that it
will sell encryption software licensed from
Elvis+ Co., a company formed by scientists
from the former Soviet space program. Sun
I actually think that Elvis+ is mostly composed of the former KGB
scientists, not space scientists. I may be mistaken though. -- igor
has a 10% equity stake in the Russian firm.
The Elvis+ products will be shipped to
overseas customers from Sun distributors in
third countries to keep them from falling
under U.S. jurisdiction.
Sun's move illustrates how global market
pressures are making it increasingly difficult
for U.S. officials to control the spread of
advanced encryption hardware and software.
The technology, which scrambles data to
protect it from computer eavesdroppers, is
considered vital to the growth of electronic
commerce. But export of powerful encryption
products is barred under U.S. export-control
laws, on grounds that terrorists and others
will use it to evade surveillance.
Challenge to U.S. Policy
The Sun action will cause the Clinton
administration to face a difficult decision, said
Jim Bidzos, president and chief executive of
RSA Data Security Inc., a unit of Cambridge,
Mass.-based Security Dynamics Technologies
Inc., a major supplier of encryption
technology. "The government has to shut this
down, or else the competitors of Sun probably
have to say, 'We're going to do the same
thing,' " he said. Mr. Bidzos, a long-time
critic of the export controls, praised Sun's
move as "blatant and in-your-face."
An administration official said Sunday the
White House didn't have enough information
to comment.
Computer-industry executives, concerned
that they could lose a valuable market to
foreign competition, have long discussed
strategies to exploit loopholes in the export
laws. But Sun appears to be the first major
company to use foreign software to supply
overseas customers. Sun executives said they
hadn't discussed the plans with U.S.
government officials but had strictly adhered
to current laws.
"This is not being done to subvert
export-control laws but to deliver solutions to
customers," said Humphrey Polanen, general
manager of Sun's network-security products
group. "Never before have organizations
outside of the United States had access to
such advanced security software."
Privacy advocates said Sun's initiative would
boost their goal of making high-strength
encryption widely available. "We think the
benefit for security outweighs the liability for
law enforcement," said Jerry Berman,
executive director of the Center for
Democracy and Technology in Washington,
D.C.
Critical Distinction
Elvis+ is based in Zelenograd, a Moscow
suburb that was once known as the "Soviet
Silicon Valley." The company's products are
based on a security protocol called SKIP that
was developed by Sun, but Sun says it
provided no technical assistance to the
Russian company. The distinction is crucial;
the export controls cover any product
developed with such assistance from a U.S.
company.
The product, which will be marketed under
the name SunScreen SKIP E, employs various
encryption algorithms, or formulas, including
so-called three-key triple DES and 128-bit
ciphers, which security experts consider to be
virtually unbreakable. The algorithms, in wide
use within the U.S., are used to scramble
digital communications; in general, the longer
the bit length of the encryption key, the more
difficult the code is to break.
Current export controls allow the export of
cryptography keys up to 40 bits, which have
been cracked by computer hackers in as little
as 10 minutes. Companies with special
approval from the Commerce Department
have recently begun exporting 56-bit
encryption software, but customers have been
clamoring for much stronger keys.
Global Competition
The restriction on U.S. exports has opened
market opportunities for strong encryption
products from foreign competitors, including
Germany's Brokat Informationssysteme
GmbH and Siemens Nixdorf
Informationssysteme AG, a unit of Siemens
AG.
"Sun's announcement is further evidence that
current U.S. policy is forcing companies to
look overseas to obtain strong encryption,"
said Edward Black, president of the Computer
and Communications Industry Association, a
Washington D.C., trade group that is lobbying
for relaxation of the export controls.
Last year, RSA Data Security announced
plans to fund an effort by Chinese
government scientists to develop strong
encryption technology, but the effort has
stalled, Mr. Bidzos said. RSA now sends
legally exportable products to its Japanese
subsidiary, RSA Japan, for bundling with
Japanese encryption software. "I can't just let
this world-wide global electronic-commerce
market take off without participating," Mr.
Bidzos said.
Sun's Mr. Polanen said SunScreen SKIP E+
will work with other products based on the
SKIP protocols. A commercial version will be
available in August; evaluation copies are
available for download from an Elvis+ site on
the World Wide Web. The software will be
priced at $99 for versions that run on
Microsoft Corp.'s Windows 3.1 and Windows
95 operating systems and at $149 for the
Windows NT version.