NY Times on Bidzos and RSA

[John Young]

>From The New York Times, June 28, 1994, pages D1, D5:

"Profit and Ego in Data Secrecy" [headline].

By John Markoff.  Special to The New York Times.

REDWOOD CITY, Calif., June 27 --

If the web of thousands of computer networks around the world 
can
be thought of as an information superhighway, then Jim Bidzos 
is
one of its best-placed toll takers.  Mr. Bidzos expects to 
become
very rich -- unless the Government has its way.

As president of a Silicon Valley company called RSA Data 
Security Inc., Mr. Bidzos,
39, controls the patents for software crucial to scrambling and 
unscrambling computer
messages so they can be sent confidentially.

Just about anyone using a computer network -- whether for 
sending personal
messages, filing taxes electronically, or shopping from home 
with a credit card --
would want such confidentiality.

On the strength of its coding technology, RSA has sold more 
than four million copies
of its software, and it has won wide support from industry 
giants like Apple Computer,
I.B.M., Lotus Development, Microsoft, Motorola, Northern 
Telecom, Novell and Sun
Microsystems.

Not Just for Spies Anymore [subhead]

Until recently cryptography, the science of sending secret 
messages, was a province
generally populated by the armed forces, governments and their 
spies.  But with the
rise of commercial computer networks, cryptography has become 
an essential
ingredient in information-age services.

RSA's software is based on an innovation in cryptography that 
permits people to
exchange private messages without actually getting together 
beforehand and
arranging a secret password.  In the past, cryptography 
required that two parties to a
communication first meet to exchange a large number that 
enabled them to encode
and decode messages.

RSA's system employs two keys, one for encoding a message, 
known as a public key,
and another for decoding it, called a private key.  People who 
wish to receive secret
messages can freely distribute their public key, which enables 
senders to encode a
message.  Only with the private key can the message be decoded.

A company selling products on-line, for instance, might make 
its public key widely
available, which would enable customers to send in a coded 
message containing their
credit card numbers that could not be intercepted and read by 
others.  The company
could decode those messages with its private key, which has a 
mathematical
relationship to the public one.

The Government fears that should the RSA system become 
available abroad, it would
lose its ability to eavesdrop and wiretap in cases involving 
risks to national security.  It
would much prefer that the global standard be based on its own 
Clipper encryption
standard, which has a "backdooor" that law enforcement 
officials can peek through.

Precisely because the RSA method has no backdoor, it is the 
choice of industry.

But to some government officials, Mr. Bidzos is nothing short 
of a scheming
businessman.

"The Government would like him to not exist," said Jeffrey I. 
Schiller, computer
manager at Massachusetts Institute of Technology, who has 
negotiated a licensing
deal with Mr. Bidzos.

And Stuart Baker, who until several weeks ago was chief counsel 
of the National
Security Agency, observed, "My sense is that his motivation is 
no more than trying to
convince people to buy his products."

Officials at the National Institute of Standards and 
Technology, another Federal
agency, say they want to create a standard that is not beholden 
to the patents of one
small company.  And the National Security Agency and the 
Justice Department want a
standard that will allow law enforcement agencies to eavesdrop 
on suspected
criminals or violators of national security.

Conventional Wisdom [subhead]

>From Mr. Bidzos's perspective, Washington remains bound up in a 
cold war mentality,
and should simply get out of the way and let RSA Data go about 
its business.  What
is more, he complains, any number of foreign companies are 
developing encryption
techniques just as hard to crack as his, so the Government's 
efforts to keep him from
exporting his software is useless, and perhaps 
counterproductive.

Notwithstanding the official concerns, RSA has developed a 
loyal following among a
wide range of computer, communications and software companies.  

"They have the
strongest technology and the best reputation in the 
cryptography business," said
William Ferguson, vice president of Semaphore, Inc., a maker of 
data-scrambling
systems that licenses RSA's software.

Adding spice to this dispute is Mr. Bidzos's ability to 
outmaneuver the Government,
most recently by snatching a crucial patent from under the 
noses of officials who were
planning to use it in an official standard they are trying to 
establish.

Several years ago, two top computer scientists from the 
National Institute of Standards
and Technology traveled to Europe to meet with a German 
mathematician, Claus
Schnorr, who holds a key patent that the Government's coding 
system may violate.

When they returned to the United States, the scientists told 
their superiors that the
United States should license Mr. Schnorr's patent.  But 
Washington was slow to act.

So in March 1993, while Mr. Bidzos was on a trip to France, he 
met with Mr. Schnorr
for a four-hour lunch.  By the end of the meal, Mr. Bidzos had 
a deal to use Mr.
Schnorr's patent.

Despite Mr. Bidzos's high profile in the world of encryption, 
RSA's revenue is small --
somewhere between $5 million and $10 million annually.  But 
analysts say that the
company has the ability to grow substantially.

"They have huge opportunity in the Internet," said Lisa 
Thorell, a researcher at
Dataquest in San Jose, Calif., referring to the global web of 
computer networks that is
regarded as a working but primitive model of a global data 
highway.

RSA is also playing an increasing role in the $500 million 
secure-communications
business for equipment that permits safe financial trasnactions 
and voice and data
communications.

A Question of Patents [subhead]

The issue clouding the future of the company is how severely it 
will suffer from export
controls and competing standards backed by the National 
Security Agency.  Last
month the Government made its own competing standard for 
signing electronic
documents mandatory for all Federal agencies, and declared that 
the digital signature
standard, as it is known, did not violate RSA's technology.

Mr. Bidzos thinks that Washington is infringing his patents, 
and, eventually, the
strength of his patent claims will be tested in court.  Rather 
then (sic) sue the
Government, Mr. Bidzos is likely to start with one of the small 
companies, like Group
Technologies Corporation, in Tampa, that is making components 
under a Government
contract, industry executives say.

Mr. Bidzos, who is a Greek citizen and a permanent resident of 
the United States, was
working at a small international marketing firm in 1985 when he 
decided to move from
Florida to the Silicon Valley to help a friend save a failing 
business.

"I wanted to do deals and stay in luxury hotels," he said 
recently at his office here.  "I
had no idea I'd be in the center of a political whirlwind."

When Mr. Bidzos joined the company in 1986, RSA was shoestring 
operation about to
go into bankruptcy.  With his help, RSA struck a deal with 
Lotus Development in 1987,
in which the software giant agreed to advance money for the 
right to include RSA
software in Lotus Notes, a program designed for work groups of 
office employees.

A year later RSA was presented with an offer to be acquired by 
Rupert Murdoch in a
multimillion-dollar deal.  A Murdoch subsidiary, the News Data 
Communications
Corporation, was developing technology for Mr. Murdoch's Sky 
TV.  So in 1988 Mr.
Bidzos flew twice to Britain to attempt to negotiate a deal, 
but the sides were far apart
on price.

He says the offers to buy RSA still roll in.  "I've received no 
less than five firm, written
offers in the last two years," he said.

He also says he doesn't think that the Government can regain 
the upper hand in the
cryptography wars.

"They've fired every weapon they have at us now, and we're 
stronger than ever," Mr.
Bidzos said.  "All they can do is try to get RSA legislated out 
of business, and that will
never happen, in my 
opinion."