NEW SOFTWARE BEATS TELEPHONE TAPPING.(BUSINESS)

Byline: CATALINA ORTIZ Associated Press

SAN JOSE, Calif. Three computer engineers worried about government intrusion are offering software over the Internet that they say turns personal computers into telephones that can't be tapped.

The free Nautilus program is intended to circumvent the Clipper chip and other measures that law enforcement says it needs to catch criminals as more and more communication takes place through digital technology.

``I think the government has gone way over the edge in invading privacy and trying to enforce wartime security on a peacetime population. We're trying to give the general public the idea they can do something about it,'' said Pat Mullarky, a Bellevue, Wash. hardware engineer and one of Nautilus' developers.

Nautilus can be used by any two people with IBM-type PCs having high-speed modems, Sound Blaster cards and Internet access.

With Nautilus, the participants decide on a secret phrase used to encode their conversation over standard phone lines, making it virtually impossible for anyone without the key to decode it.

The program would thwart the Clipper chip, which the Clinton administration advocates as a standard for computers and telecommunications equipment. The chip encodes communications, making them secure. But the government would have the key to the code to allow court-allowed government surveillance.

Civil libertarians and most of the computer industry oppose the Clipper chip. Many also oppose a bill Congress passed last fall to spend $500 million over three years to install equipment in telephone and cellular networks to permit legal wiretaps.

Spokesmen for the FBI in Washington and San Francisco said Friday they weren't familiar with the Nautilus program and had no immediate comment.

But the bureau has said that measures like Clipper and the telephone bill are necessary for effective law enforcement.

``The FBI had been thwarted in important cases by sophisticated digital technologies already installed on some telephone networks,'' FBI Director Louis Freeh said when the Senate passed the telephone bill last fall.

``We would have been completely prevented in a very short time from carrying out any court-approved wiretapping'' without the bill, Freeh said.

Mullarky developed Nautilus with two software engineers, Paul Rubin of Milpitas, Calif., and Bill Dorsey of Los Altos, Calif. It has been availableon the Internet since Wednesday.

Nautilus can be found on the Internet through the sci.crypt newsgroup.