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Firm To Challenge Encryption Laws

March 20, 1998

SAN FRANCISCO (AP) _ In a major challenge to federal export limits, a software company will start selling a sophisticated encryption program today to international customers through an overseas subsidiary.

Network Associates Inc. will sell the ``Pretty Good Privacy″ software through its Dutch subsidiary. The software scrambles e-mails and files, preventing eavesdroppers from seeing information sent across the Internet and stored in databases.

Federal law requires U.S. companies that write and export sophisticated encryption software to include a ``key″ or entry point for law enforcement officials to decode data. The limits address concerns that encryption technology may fall into the wrong hands, enabling wrongdoers to mask illicit electronic activities such as money laundering.

Network Associates will get around the law by having a Swiss company, Cnlab Software, write the software. Since the U.S. company isn’t directly involved in either writing or selling the overseas version of Pretty Good Privacy, the software won’t contain a key.

``This is the most significant challenge to date to the U.S. encryption export policy,″ said Ted Julian, an analyst with Forrester Research in Cambridge, Mass. ``This is big enough that the government’s lack of response is in itself a response.″

The company said it explained the plan to the Commerce Department and received no objection.

Last year, Sun Microsystems Inc. announced a similar plan to use a Russian firm to circumvent the U.S. law but Commerce officials have started an investigation into whether the company assisted the Russian firm. The ongoing investigation has delayed Sun Microsystems’ plans.

Rich Hornstein, a vice president at Network Associates, said the company isn’t assisting the Swiss company in any way with the software.

Hornstein said the Swiss software is ``functionally equivalent″ to the PGP software sold in the United States.

PGP uses 128-bit encryption, which would take ``10,000 years with a supercomputer to break,″ according to Peter Watkins, general manager of NA’s Net Tools Secure Division.

In May, the company got a federal waiver allowing it to sell Pretty Good Privacy software to the international subsidiaries of 100 leading U.S. companies.

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