Encryption, key recovery, and commercial trade secret assets: a proposed legislative model.

• Author: Soma, John T.

Encryption is not for e-mail alone, but also for digital assets which comprise a growing portion of any company's mission critical data, such as trade secrets and intellectual property. However, there are numerous problems that could arise if an employee encrypts mission critical data. What happens if that employee is no longer able to provide the key to encrypt the data? What if the employee resigns in anger and hides or destroys the keys? What if the employee dies before telling anyone where the key is? What if the employee engages in industrial espionage and provides the key to competitors? This article reviews the current technical, business, and legal concerns surrounding these issues and ends with an outline of proposed legislation to address these complex issues.

1. INTRODUCTION

   Encryption and Commercial Imperatives

   Key recovery is a necessary component of effective trade secret and corporate communication protection. Simply stated, key recovery is any system that allows a party other than the initial user to access the encryption key.(1) In the above scenario, the third-party is the corporation, the employee's boss. The boss needs access to the keys to safeguard against the loss of critical information.

   Initially, this scenario leads to the conclusion that companies should seek key escrow systems to avoid devastating losses of information protected by strong encryption and long gone keys. This scenario, however, has begun a public debate regarding the nation's encryption, key escrow, and encryption export policies.(2) The debate generally focuses on export controls restricting the overseas availability of strong encryption as well as law enforcement interests regarding access to encrypted data both to thwart crime and terrorism and to successfully prosecute crimes.(3)

   A Proposal

   Private and public sector interests are divided in the key recovery debate. This Article proposes that commercial interest in key escrow has common ground with law enforcement and national interests. The public and private sector interests can be satisfied by a statutory and regulatory regime that: (1) establishes key recovery as a required feature of encryption systems used domestically in interstate commerce and encryption systems designed for export; (2) allows unlimited encryption strength; (3) allows the private sector to test, set and update the recovery technology as needed; and (4) allows on-site or third-party escrow, but does not mandate government-sanctioned off-site key escrow.

   A growing sector of the business community recognizes that key recovery is essential to rational business practices. In October 1996, a small group of companies formed the Key Recovery Alliance ("KRA").(4) KRA now boasts over thirty members.(5) KRA provides detailed analyses of the business community's need for reliable key recovery systems, including scenarios for the recovery of stored data and communicated data, and scenarios that focus on the fluid nature of data, such as portability and interoperability among network or associated companies.(6) For example, KRA identifies the simple scenario of a user who has encrypted a group of files and then loses the key.(7) There are also complicated scenarios that arise from transferring data among different encryption systems, different companies, and locales with differing legal regimes.(8) Regardless of the scenario, the message of KRA's member organizations is that, "[i]nformation is a vital corporate asset, and cryptology ... has emerged as the most effective means of securing information in transmission and storage."(9) Furthermore, "key management systems ... will be essential in facilitating the growth of Global Electronic Commerce."(10)

   Development of Cryptology Techniques and Laws

   Once the domain of diplomats, armies, and spies seeking to protect state secrets, codes and code-breaking evoked secrecy and intrigue. Now, homemakers and entrepreneurs use encrypted messages to protect everyday gossip and common commercial missives. Since personal computers of average capability can encrypt with the near confidence of a national security agency, the veneer of intrigue revealing a world of well-protected secrets and not-so-secret secrets has dissipated.

   Before the development of today's code systems, a nation's best codes were routinely broken. Germany's "Enigma" code and Japan's "JN-25" code, both capable of producing millions of possible decoding solutions, quickly became obsolete. The Allies succeeded in breaking these codes, and defeating the Axis powers in the Atlantic and the Pacific. Today, code systems can produce millions of trillions of possible decoding solutions, or more solutions than there are particles in the known universe.(11)

   The worldwide distribution of this extremely strong encryption, based on 1970's research,(12) and available on the Internet since 1991 as freeware,(13) creates a dilemma of awesome dimensions. Strong encryption enables private and commercial users to pursue transactions with confidence in the security of their communications. However, the possibility of its use by criminals, terrorists, and rogue nations may force the law enforcement and national security communities to restrict its use, possibly affecting the significant confidence it now engenders.

   The debate over whether strong encryption should be unfettered or controlled generates heated debate. Some believe that cryptography allows for the exercise of a right to privacy that is "at the core of American life."(14) "[A] powerhouse of economic activity and opportunity can be unleashed" with legislation that encourages the use of strong encryption techniques.(15) Others believe that "the widespread use of robust unbreakable encryption ultimately will devastate our ability to fight crime and prevent terrorism."(16)

   This article examines the conflicting opinions of this debate. Part II discusses the development of strong encryption techniques and the current statutory and regulatory environment governing cryptosystems. Part III explores the competing perspectives of national security, privacy, and commerce. Part IV examines policy choices and assumptions upon which the proposal to require key recovery is based. Finally, Part V offers legislative and regulatory key recovery proposals, and addresses current legislative proposals that affect the use and distribution of strong encryption.

2. LEGAL AND REGULATORY ENVIRONMENT

   1. Development of Encryption Technology

      A brief examination of history and terminology is necessary to understand the recent developments in cryptology.

      Terminology

      "Cryptology" is the technique of concealing the contents of a message by a code.(17) "Encryption" is the use of a mathematical algorithm to transform a message into a form that is unreadable unless a decryption key is used to decode the message.(18) The recipient of the message holds the "key" which is the formula used to decode the message.(19) A "cryptosystem" is a technique to code and decode messages.(20)

      Current cryptosystems come in two basic configurations. The first is a "shared single key cryptology" which requires the same key to encrypt and decrypt the message.(21) In this type of system, the security of the key is critical since the key must travel in some manner from the sender to the recipient.(22) The second is a "public key cryptography," which uses two keys; one to encrypt the message and one to decrypt it.(23) The advantage of this system is that the asymmetry of the keys prevents a person from decoding the message if either of the two keys is compromised.(24) A person's "public key" is published on the Internet or alternatively made available: anyone wishing to send that person an encrypted message uses the public key to encode the message.(25) Then the recipient uses a "private key" to decode the encrypted message.(26) For purposes of this article, "public key cryptography" and "strong encryption" will be used interchangeably.

      The terms "key escrow" and "key recovery" refer to the processes of securing the private key portion of a public key system in a location that can be accessed by third parties, or having a system in place that recovers the private key.(27) The third parties are commonly either business organizations who need access to an employee's file if that employee's private key became unavailable, or law enforcement agencies acting under court order to obtain encrypted messages considered to be criminal.(28)

      Finally, the quality of a public key cryptosystem depends on two factors: the mathematical algorithm and the length of the key.(29) The development of secure algorithms will be discussed shortly. The length of the key is expressed in terms of "bits."(30) Typical bit lengths discussed in the current debates include 40-bit, 56-bit, 128-bit, and 256-bit schemes.(31) When discussing key lengths, it is important to note that a 128-bit scheme, for example, is not three times more powerful than a 40-bit scheme. In fact, it is many times more powerful since the scale is exponential, not arithmetic.(32) A United States House of Representatives report noted this difference:

      To give some practical sense of the difference, one researcher estimated that a relatively inexpensive computer attempting a "brute force" effort to decode -- i.e. simply trying all the mathematical possibilities -- could on average decode a 40-bit scheme in a few seconds, whereas a 128-bit scheme would on average take millions of years.(33) Thus, it is clear that policy choices that would fix a certain bit length for regulatory purposes have either no impact or a profound impact depending on the length of the key chosen.

      History

      The history of "public key cryptology" reveals that technical innovation lead to governmental angst over public access to strong encryption.(34) In the mid-1970s, two Stanford researchers, Whitfield Diffie and Martin Hellman, addressed key management questions and developed public key...