You've got to hand it to RSA Security's marketing team: By releasing its license on the RSA encryption algorithm three weeks before the patent expires, it changed the tone of the story. RSA didn't lose out on something: It gave it up willingly, into the public domain.

The end of the patent means that companies who want to use the RSA encryption algorithm in the United States no longer have to license it from the firm, RSA Security. The patent hasn't extended to products sold outside the United States, because the algorithm was published in 1977 before the Massachusetts Institute of Technology applied for its patent. (See section on History, on page two.)

The fact that RSA released it two weeks early means that the company wanted to take advantage of "a giant P.R. opportunity," according to Forrester Research senior analyst Frank Prince.

"I mean, why not? It's taking something that was going to happen, and it's taking advantage of a chance to make something out of it."

Observers were unimpressed. Simson Garfinkel, who wrote about the origins of RSA in his 1995 book, "PGP: Pretty Good Privacy" (O'Reilly & Associates), wrote, "By releasing the patent three weeks early, they changed the news story to that they were releasing it into the public domain. If they wanted to make a difference, they should have released it ten years ago."

The end of the licensing

As for what it means to the revenue streams of RSA Security and other encryption companies, analyst Prince said the end of the patent means "nothing and nothing."

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"Patents have a 17-year life, so this comes as no surprise to RSA," Prince said. "A few years ago, they started rebuilding their business so that licensing the algorithms was a very small part of the revenue."

Although competing firms could distribute products using RSA outside the United States, Prince says very few firms have gone that route, since the United States makes up such a large part of the international cryptography market.

In some ways, the end of the patent puts RSA in a situation like businesses that rely on open source software: the jewel at the center of their product offerings is free. But the company's revenue model is based on

• toolkits and other value adds,
• service and maintenance contracts, and
• brand recognition and authority.

As a poster known as "Cardinal Biggles" noted on Slashdot:

"Patents grant an exclusive right to exploit an invention, in exchange for the publication of the way it works. What expires about RSA in two weeks is that exclusive right, not any form of secrecy. So 'public' is used in two ways here: the way RSA works always has been public. The right to use it hasn't been, but will now become, public."

On the next page, we'll talk briefly about the origins of the RSA algorithm and its patent.