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Encryption ban thwarted?
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March 20, 1998: 3:39 p.m. ET
Export of Network Assoc. encryption software shows limits of enforcement
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NEW YORK (CNNfn) - Network Associates' decision Friday to sell its encryption software overseas may have an impact beyond one company's flirtation with violating U.S. export laws.
William Reinsch, the Commerce Dept.'s undersecretary for export administration, said Network Associates' actions could make it harder for the government to enforce its restrictions on selling encryption software overseas.
Network Associates said Friday that a Dutch subsidiary would begin selling a version of its Pretty Good Privacy (PGP) encryption software.
Encryption software is an important component for ensuring secure business transactions, particularly when such information as credit card numbers is transmitted. The technology also is used in sending e-mail and other documents over the Internet.
The Commerce Dept. restricts the export of encryption technology because of fears that the technology may be used by terrorists or drug traffickers. There are no restrictions, however, on exporting the text on the original source code of the software.
"At this point, we don't know if they've skirted the law," Reinsch said. "The question right now is, did they do it illegally?"
But even if Network Associates didn't break any laws, today's announcement may have a lasting impact. If the company has successfully gotten around the law, Reinsch said, it could pave the way for other companies to do the same.
"If more companies do this, the harder it becomes for us to achieve what we want," he said. "I'm very disappointed."
Network Associates, however, said it never provided Cnlab Software, the Switzerland-based company that is developing the international version of PGP, with the product's source code.
"All we did was ask for a functionally similar product," said Richard Hornstein, Network Associates' vice president of legal affairs and corporate development. "We don't know how they did it. We absolutely did not give them the source code. We had no connection."
Hornstein said PGP's source code is published in a book that other companies and individuals have used as the basis for their own encryption products for years. He said it's possible Cnlab used that book as the basis for its version of PGP.
Although Reinsch said he doesn't officially comment on whether his office is conducting investigations, he noted that the Commerce Dept. will be "examining this issue very closely."
"We're not sure what they have a problem with," Hornstein said. "We've been very open throughout this process. We've had several meetings with the Commerce Dept. over the course of several months. We even gave them a copy of the press release early this week before any official announcement was made."
Despite the loopholes in U.S. export law on encryption technology, Reinsch said, it would be difficult for the Commerce Dept. to enforce harsher restrictions.
"The fact is there's a way to do it [circumvent export laws]," he said. "It would be hard for us to plug all the pathways, except by imposing domestic manufacturing controls, which we've said we're not going to do." 
-- by staff writer John Frederick Moore
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