Pardon the “Intrusion” – Cybersecurity Worries Scuttle Wassenaar Changes

by Davis Wright Tremaine LLP
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Concerns over proposal to implement cybersecurity provisions of the Wassenaar Arrangement prompt Commerce Department to pull proposed rule

Companies concerned about their cybersecurity posture can breathe a small sigh of relief, as the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) recently announced it was scrapping plans to implement new export controls for cybersecurity products. Many observers and businesses felt the proposal would do more harm than good.

BIS had previously sought public comment on a proposed export control rule to implement the most recent changes to the Wassenaar Arrangement, a multilateral export control association comprised of 41 member states designed to control the export of dual-use technologies. If put in place, the rule would have added certain cybersecurity items – chiefly “intrusion software” and Internet Protocol (IP) network communications surveillance systems – to BIS’ Export Administration Regulations (EAR).

Cybersecurity experts and firms expressed alarm at the rule’s language. Many felt the rule’s vague definition of “intrusion software” would encompass too much technology and too many practices, and stifle the very international research and cross-border technology exchanges needed to combat emerging cyber-threats. Because cybersecurity is a global issue that requires cross-border cooperation between cybersecurity researchers and firms, enterprises ranging from multinational businesses to cybersecurity firms expressed concern that the proposed rule would ultimately impede their ability to discern and eliminate new vulnerabilities.

The alarm about the BIS’ implementing rules was not unwarranted. The enforcement of the Wassenaar Arrangement’s provisions have real impact on how companies are able to legitimately share cybersecurity information and technology across borders. As an example, on September 3rd Hewlett-Packard decided  to withdraw its sponsorship of Pwn2Own, an international hacking contest based in Japan. The contest is designed to detect vulnerabilities in some of the most commonly used software and mobile devices. The decision to withdraw its sponsorship was based on concerns that the company would not be able to comply with Japan’s implementation of the Wassenaar rules. Hewlett-Packard had already spent over $1 million in legal fees trying to comply with Japan’s Wassenaar regime before it announced its decision to withdraw from the competition.

BIS apparently heeded those worries and will issue a new round of proposed export controls for dual-use cybersecurity software and products, according to Commerce Department officials in late July. It is not clear how and to what degree the second round of rules will differ from BIS’ prior proposal, but BIS’ decision to revisit the issue indicates that the agency considered stakeholders’ comments. Still, interested parties should be prepared to sharpen their pencils and send additional comments after the second proposed rule is published.

What Was the Problem with BIS’ Proposed Cybersecurity Export Controls?

The Wassenaar Arrangement, which is implemented in the United States via the EAR, was modified in 2013 to include controls for certain cybersecurity-related technologies. Specifically, the revisions added “intrusion software” and IP network communications surveillance systems to the list of controlled technologies. The BIS’ proposed rule would have added them to the EAR, subjecting these technologies as well as related systems and devices to heightened export restrictions and requiring licenses for cross-border use in all countries besides Canada. BIS also stated it would have a policy of presumptive denial for items that have or support rootkit or zero-day exploit potential.

Cybersecurity observers and stakeholders expressed concern about the wide array of items that could be caught up in the definition of “intrusion software,” along with the heightened burdens of seeking additional export licenses to share such technology across even friendly borders, or within U.S. multinational companies.

BIS’ proposed rule would have restricted exports on the following:

  • Systems, equipment or components specially designed for the generation, operation or delivery of, or communication with, “intrusion software;”
  • Software specially designed or modified for the development or production of such systems, equipment or components;
  • Software specially designed for the generation, operation or delivery of, or communication with, “intrusion software;” and
  • Technology required for the development of “intrusion software.”

“Intrusion software” was broadly defined as software specially designed to avoid detection by monitoring tools or defeat protective countermeasures of a computer or network-capable device. Such software must also be capable of either:

  • Extracting data or information from a computer or network-capable device, or modify a system or user data; or
  • Modify the standard execution path of a program or process in order to allow the execution of externally provided instructions.

Hypervisors, debuggers, Software Reverse Engineering (SRE) tools, Digital Rights Management (DRM) software, and asset tracking or recovery software are specifically excluded from the definition.

Based on this broad definition, stakeholders feared the rule would unnecessarily encompass technology intended simply for research. Cybersecurity observers such as Representative Jim Langevin (D-RI) worried that the inclusion of rootkit and zero-day exploit functionality – terms that the rule did not define – in intrusion software’s definition would prevent firms from evaluating and testing their cybersecurity posture against new threats. Other firms such as Google gave voice to their suspicion that the rule would have required cybersecurity firms to seek export licenses simply to share information on global cyber-vulnerabilities or conduct legitimate cross-border cybersecurity research. Paradoxically, U.S. multinational firms might have had to comply with additional licensing requirements to share information with their own offices overseas, inhibiting their ability to timely respond to new cyber-threats.

Rule Proposal Round Two: What’s My Firm to Do?

If BIS’ decision to pull the proposed rule teaches us anything, it is that online threats are complex and dangerous, cybersecurity technology is rapidly evolving and necessary to combat the malicious threats, and opinions of cybersecurity experts matter in the agency’s deliberations.

As the agency gears up for round two, virtually all firms – from U.S. businesses with interests abroad to the smallest of small businesses that depend on up-to-date cyber-defenses to protect their assets – should be prepared to participate in BIS’ comment period. Indeed, Hewlett-Packard’s recent experience with having to pull back from Pwn2Own after struggling to meet Japan’s rules implementing the Wassenaar Arrangement should be a warning to all businesses that their input is vital to developing coherent rules that will allow companies to trade in the very information needed to respond to emerging cyber-threats.

BIS has not published a timeline of when it will draw up and release its next revised rule, but stakeholders should be prepared to review whatever proposal BIS draws up in the coming months and share any feedback on the proposal.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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