U.S. to Loosen Encryption Restrictions

The federal government plans to loosen restrictions on data-scrambling technologies that U.S. companies can sell to overseas customers in medicine, finance and electronic commerce, Vice President Al Gore said Wednesday.

The government also said it will stop demanding that companies put a “spare key”--a feature that allows law enforcement officials to read scrambled data--into products of a particular level of sophistication.

Industry executives said Wednesday they were pleased by the moves, which will make it easier for many firms to sell encryption products overseas. But some executives along with privacy advocates said the moves stopped far short of scrapping controls they believe are slowing the growth of commerce on the Internet and are jeopardizing the privacy rights of individuals.

“Anything that eases encryption restrictions is a step in the right direction,” said Dan Scheinman, vice president for legal and government affairs at network equipment maker Cisco Systems of San Jose. “It’s a sign that says the administration is ready to engage in further discussions. But this doesn’t resolve the problems we and others have identified.”

For about five years, industry and privacy advocates have criticized the Clinton administration’s export restrictions on encryption technology, which protects information by scrambling it but can also thwart law enforcement and national security agents trying to eavesdrop on foreign governments and criminals.

Although there are currently no controls on the kinds of encryption U.S. citizens may use at home, the administration has limited the technologies companies may sell abroad, on grounds they could be used by terrorists or hostile governments.

Critics, however, contend that such controls hurt U.S. firms because foreign companies already make sophisticated encryption products.