------- Start of forwarded message ------- Software Industry to cut deal on Clipper HIGH-TECH FIRMS WON'T OPPOSE DATA-SCRAMBLING CHIP THEY'LL ACCEPT 'CLIPPER' PROPOSAL IF U.S. WILL EASE SOFTWARE EXPORT RULES. By LEE GOMES Mercury News Staff Writer With some privacy advocates crying foul, a group of prominent high-tech companies is dropping its opposition to a controversial White House proposal for a new data-scrambling chip in exchange for a relaxing of the federal rules restricting the export of scrambling software. The Digital Privacy and Security Group, a collection of computer companies and related associations, said Monday that it could accept the administration's ''Clipper'' chip proposal if the chip's adoption was voluntary, and if other encryption software were available for sale, especially overseas. The White House Clipper proposal would establish a special computer chip that would be used to scramble digital transmissions, including computer data and next-generation telephone calls. But the scheme the chip would use to encode the messages would be kept secret, and the government would have the right to get a court order to break the code if it wanted to wiretap a conversation. As originally conceived by the administration, Clipper would be the only advanced encryption technology that could be sold by U.S. firms overseas. Many in the computer industry had opposed the Clipper proposal, both out of privacy and civil rights concerns, but also because more advanced coding software is available from private companies. However, those private coding systems could not, most likely, be broken by law enforcement or intelligence agencies, and both groups are supporters of the Clipper proposal. The switch on Clipper was contained in a letter to President Clinton and marked what a spokeswoman for one of the groups labeled a ''compromise.'' The groups now say they can accept a voluntary form of Clipper as long as the administration drops the regulations that prevent U.S. companies from selling advanced encoding software overseas. Encryption software is one of the few high-tech products whose foreign sale is still tightly controlled. The ban originally was ordered for fear that foreign governments could gain access to advanced U.S. coding software and then use it to shield their communications from American intelligence agents. But the software industry argues that because encryption software identical to the sort sold by American firms is now available from dozens of overseas suppliers, the ban doesn't provide any additional security, but simply prevents U.S. companies from making extra sales. The ban runs counter to the Clinton administration's demonstrated willingness to please its high-tech friends by relaxing export control rules that no longer serve a national security purpose. Most in the software industry say it survives because of strong support from the National Security Agency. However, on Monday, some Clipper critics charged that the industry was sacrificing a privacy issue to gain a sales boost. ''The entire point of Clipper is wrong,'' said David Banisar of the Computer Professionals for Social Responsibility, a mostly liberal policy group. ''The premise (of Clipper) is that they have the right to surveil and nothing should get in the way of that right.'' Banisar said his group, along with such technical associations as the Association for Computing Machinery and the Institute of Electrical and Electronic Engineers, would continue to oppose Clipper because ''they are principled enough not to cut any deals.'' But Bruce Heiman, a Washington attorney working with a group of major U.S. software firms, said the free availability of alternate encryption software would make the privacy concerns about Clipper irrelevant. That's because, he said, individuals and companies could use the software to encode their transmissions in a way that not even the Clipper chip could understand. ------- End of forwarded message -------