---------- Date: Wednesday, June 01, 1994 9:41AM ADMINISTRATION'S CRYPTO PLAN MAY HAVE PATENT PROBLEMS - MIT professor says he deserves royalties An MIT computer scientist is trying to earn royalties on the use of the Administration's Clipper encryption plan. Negotiations, which one government official described as "erratic," have been going on for a couple months. Silvio Micali, the professor, holds one patent that he says covers a critical part of the government's Clipper project. He says the U.S. Patent and Trademark Office approved but has not yet publicly issued a second patent improving on the original invention. The royalty negotiations throw a wildcard onto the table of U.S. cryptography policy at an uncertain time. If the patent covers Clipper, opponents of U.S. policy will likely seize on the patent dispute as just one more reason to kill Clipper; users of Clipper will face higher costs; and the U.S. government will also have a much harder time exporting Clipper technology. Foreign governments recoil at the prospect of paying royalties to a U.S. citizen. Still, it is unclear how committed Micali is to facing off against barrel-chested U.S. negotiators. So far, he has been talking amiably to Michael Rubin, deputy general counsel of the National Institute of Standards and Technology, without the aid of a lawyer. "I didn't think that in dealing with the U.S. government, I would need a lawyer," Micali says. "I may be proved wrong." The key escrow, or Clipper, proposal is a coding scheme to provide privacy to voice, fax, and computer communications through the use of a secret codes. The code is embedded in a computer chip, the Clipper chip, that the government wants installed in telephones, fax machines and computers. But there's a catch: The secret key that unlocks messages is broken into two pieces and held in escrow by the government. With a court order, the government can reunite the two escrowed keys and tap the coded communications. Micali says that his patent covers the basic notion of escrowed keys in which trustees are given guaranteed pieces of the key. And while most of the 18 claims of the patent don't seem relevant to Clipper, the last four could be troubling. One of the claims clearly covers the division of a secret key into pieces and the recreation of those pieces in order to tap a line. If it applies to Clipper, Micali's patent would pose a vexing problem. Unlike most of the rest of the key U.S. cryptographic patents, the government does not seem to be able to use Micali's technology for free. Micali says he made the invention on his own time, not while working on a government-funded project, which would give the U.S. government royalty-free use. At least initially, the government will be the primary user of Clipper chip encryption devices. Officially, it is a voluntary standard for government use. But the Clinton Administration hopes the concept will spread into the private market. If that happens, consumers could face a higher price tag because of the Micali patent. The Clipper chip itself currently costs $25. A NIST official says the government is now evaluating Micali's patent and talking to the professor. The analysis includes whether the government provided any sort of funding to Micali's research that led to the invention underlying the patent. Micali initially approached the government several years ago about adopting a cryptographic scheme that he says is preferable to Clipper. Clipper is a private key system in which the same key, a so-called session key, is used to both code and decode a message. From a practical point of view, this requires the sender and user to exchange keys beforehand, which can be dangerous, time-consuming and expensive. Micali envisioned a public key system that would still give the government access to tap phone lines. Public key, of course, is the greatest recent cryptographic breakthrough because it frees the parties from selecting a key in advance. In a public key system, a sender will code a message with the receiver's public key, which is widely known. The receiver will then decode the message with his or her private key, which is mathematically related to the public key but difficult to compute. Under Micali's scheme, users would break their private keys into pieces and give each escrow agent a piece and a mathematical proof that the piece is legitimate. Upon proper authority, the government could then reassemble the pieces of the key to tap a message. The government obviously opted for Clipper rather than Micali's approach, but Micali did not go away. Last January, the patent office issued his patent, so the topic of conversations shifted to royalties. Micali won't say what sum he is seeking from the government except that it is reasonable compared to standard practices. It is not unusual for patent holders to seek 5 percent to 10 percent of sales if they feel they hold a core patent and up to 2 percent if their invention is peripheral. The Micali patent covers a public key system, which Micali says would give users more control over their keys and would be less expensive, even with royalty payments, than a hardware-based solution, like Clipper. Most of the patent's claims, therefore, don't cover Clipper, which is a private key system. (A user, however, may want to use a public key system like RSA to generate the session key under Clipper.) Micali's patent lawyer was wise enough to round out the patent with four general claims that cover the use of escrowed keys, regardless of the method. Micali says his second patent, which is not yet public, may cover Clipper even more directly. Claim interpretation, of course, is a matter of impression and imprecision, especially when it relates to inventions implemented in software. And it may be that NIST decides that Micali's claims don't specifically cover Clipper. In that case, Micali would be facing a legal bill of hundreds of thousands of dollars to make his case in court. Until that time, Micali is not revealing his strategy other than to say that he may soon need a lawyer. ----- that's all -----