U.S. government agencies are scrambling to plug one of their biggest security holes: sensitive information -- names, addresses and Social Security numbers, for example -- stored on laptops, handhelds and thumb drives. 

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In the last year, agencies have purchased 800,000 licenses for encryption software through the federal Data at Rest (DAR) Encryption program, which is run jointly by the General Services Administration and the U.S. Department of Defense.

"Sales have been very brisk," says Fred Schobert, CTO for integrated technology services at the General Services Administration’s Federal Acquisition Service. "We've been somewhat overwhelmed."

The government’s fast adoption rate of encryption software comes after numerous headline-grabbing security breaches. Laptop encryption has also been on the rise among corporations, including the likes of EMC and IBM.

It’s been two years since teens stole a laptop from the home of a U.S. Department of Veterans’ Affairs employee’s home, putting at risk for identity theft a database of 26.5 million names and Social Security numbers for 26.5 million veterans and military personnel. 

But this year alone, laptops with personally identifiable information have been stolen from Bolling Air Force Base, a Marine Corps base in Okinawa, Japan and the National Institutes of Health in Bethesda, Md. In all of these cases, data that wasn’t encrypted on these laptops could have been used by thieves for identity theft, according to a list of known security breaches compiled by the Privacy Rights Web site. 

While sales on the DAR Encryption program are stronger than anticipated, federal officials admit they haven’t secured all of their laptops, handhelds and removable drives yet.

``It was originally thought that there would be about 1 million laptops in DoD and one million in civilian agencies. We roughly came up with the number of 2 million laptops. However that number is informal. It’s constantly being expanded and contracted,’’ says David Hollis, program manager for the Defense Department’s Data at Rest Tiger Team.

``We’re not worrying about how many laptops and PDAs there are in the government. We’re trying to provide an opportunity for federal, state and local governments to secure what’s out there,’’ Hollis said.