- Key Findings
- Structure of the Report
- The Economic Espionage Act of 1996
- Overview of the Threat
- Industrial Espionage and Trade Secret
- The Cost of Economic and Industrial
Espionage and Trade Secret Theft
- Origin of the Threat
- Targeted Information and Technology
- Computer Crimes
- Collection Methods
- Espionage and Other Illegal Collection
- Lawful Collection Methods
- Unsolicited Requests for Information
- Inappropriate Conduct During Visits
- Solicitation and Marketing Services
- International Exhibits, Conventions,
- Joint Ventures and Front Companies
- Acquisition of Technology and Companies
- Co-Opting of Former Employees and
- Open-Source Collection
Economic Espionage Act of 1996
- The Economic Espionage Act of 1996, signed by President Clinton
on 11 October 1996, will help to protect valuable US trade secrets.(1)
- Updated information, as reported from the US counterintelligence
community, reaffirms the findings of the 1996 Annual Report
and includes the origin of the threat, collection targets, and methods
- Traditional threat countries and a number of non-traditional threatcountries
continue their collection of US trade secrets.
- The United States counterintelligence community has specifically
identified the suspicious collection and acquisition activities of
foreign entities from at least 23 countries.
- Analysis of updated information indicates that of those identified
countries, 12 are assessed to be most actively targeting US proprietary
economic information and critical technologies. This list has not
changed since the 1996 Annual Report on Foreign Economic Collection
and Industrial Espionage.
- The increasing value of trade secrets in the global and domestic
marketplaces, and the corresponding spread of technology, have combined
to significantly increase both the opportunities and motives for conducting
- Foreign collection continues to focus on US trade secrets and S&T
information and products. Of particular interest to foreign collectors
are dual-use technologies.
- While the clandestine efforts of foreign intelligence services continue,
changes in collection methods of operation are evidenced by a transition
from reliance on clandestine and illegal activity to overt and legal
collection methods. This transition is not limited to commercially
sponsored activity, but also includes foreign intelligence service
The Intelligence Authorization
Act for Fiscal Year 1995, Section 809(b) requires that the President
annually submit to Congress updated information on the threat to US industry
from foreign economic collection and industrial espionage. This report
updates the second Annual Report to Congress on Foreign Economic Collection
and Industrial Espionage 1996, which was released in May 1996.
In coordinating a community-based response to the above requirement,
the National Counterintelligence Center (NACIC) requested the assistance
of the following agencies:
- Air Force Office of Special Investigations (AFOSI).
- Central Intelligence Agency (CIA).
- Defense Intelligence Agency (DIA).
- Defense Investigative Service (DIS).
- Department of Commerce.
- Department of Customs.
- Department of Energy.
- Department of State.
- Federal Bureau of Investigation (FBI).
- National Security Agency (NSA).
- Naval Criminal Investigative Service (NCIS).
- US Army Intelligence and Security Command.
All of the above agencies responded to the request for information.
Four agencies had no significant changes or new information to report.
The remaining eight agencies provided numerous incidents and trends
relating to the continuing foreign economic collection against the United
In accordance with the
Intelligence Authorization Act for Fiscal Year 1995, which requires
an annual update of the threat from foreign industrial espionage, Section
809(a) of the Act specifies three aspects of the threat to be reported.
In the original language from the Act:
The threat to US industry of foreign industrial espionage and any
trends in that threat, including:
- The number and identity of the foreign governments conducting foreign
- The industrial sectors and types of information and technology targeted
by such espionage.
- The methods used to conduct such espionage.
As requested by Congress, this report updates the US Government's
last report on foreign economic collection and industrial espionage.
Set forth is a full range of potentially damaging collection efforts
against US national and corporate interests by foreign intelligence
services, government agencies, private firms and other foreign entities,
some of which may be sponsored at their government's national level.
Their collection efforts against US economic interests and the acquisition
of US technological and proprietary information may be either legal
or illegal. Despite the legal nature of a large portion of foreign economic
collection, much of the data sought may be sensitive in nature and may
include technical, financial, and/or proprietary commercial and government
On 11 October 1996, President
Clinton signed the Economic Espionage Act of 1996, culminating
a nearly two-year effort on the part of the FBI and US industry professionals
to provide new legal tools to prosecute those who are guilty of economic
espionage via the theft of trade secrets. In an effort to effectively
deal with the threat, the Act resolves many gaps and inadequacies in existing
federal laws by specifically proscribing the various acts defined under
economic espionage and addressing the US national and economic security
aspects of the crime.(2)
The law also addresses the theft of trade secrets where no foreign involvement
As defined in the Economic Espionage Act of 1996, the term trade secret
refers to all forms and types of financial, business, scientific, technical,
economic or engineering information, including patterns, plans, compilations,
program devices, formulas, designs, prototypes, methods, techniques, processes,
procedures, programs, or codes, whether tangible or intangible, and whether
or how stored, compiled, or memorialized physically, electronically, graphically,
photographically, or in writing if:
- The owner thereof has taken reasonable measures to keep such information
- The information derives independent economic value, actual or potential
from not being generally known to, and not being readily ascertainable
through proper means by the public.
Before the enactment of the EEA, there was virtually no federal statute
that outlawed the theft of trade secrets. Federal prosecutors were limited
to using laws such as the Interstate Transportation of Stolen Property
Act, the Computer Fraud and Abuse Act, and Mail and Wire Fraud statutes,
to prosecute individuals for the theft of trade secrets. Due to the
limitations and inadequacies of these laws in prosecuting the theft
of trade secrets, it became evident that a federal statute was needed
to specifically proscribe the various acts defined as economic espionage
and to address the national security aspects of this crime.
The EEA contains two
separate provisions that make the theft or misappropriation of trade secrets
a federal criminal offense. The first provision, under Section 1831, is
directed toward foreign economic espionage and requires that the theft
of a trade secret be done to benefit a foreign government, instrumentality,
or agent. In contrast, the second provision, under Section 1832, makes
criminal the commercial theft of trade secrets, regardless of who benefits.
Reflecting the more serious nature of economic espionage, a defendant
convicted for violating Section 1831 can be imprisoned for up to 15
years and fined $500,000 or both. Corporations and other organizations
can be fined up to $10 million. A defendant convicted for theft of trade
secrets under Section 1832 can be imprisoned for up to 10 years and
fined $500,000 or both. Corporations and other entities can be fined
no more than $5 million. Prior to the passage of the EEA, Attorney General
Janet Reno assured Congress in writing that the Department of Justice
would require all prosecutions brought under the EEA be first approved
by the Attorney General, the Deputy Attorney General, or the Assistant
Attorney General of the Department of Justice's Criminal Division.
A defendant cannot be convicted under the EEA if it is proven that
the elements of a trade secret were discovered through parallel development
or reverse-engineering. In addition, the EEA does not apply to individuals
who seek to capitalize on their lawfully developed knowledge, skills,
or abilities. The EEA also does not prohibit legitimate economic collection
or reporting by personnel of foreign governments by lawful means.
The EEA provides that the court, in imposing sentencing, "shall" order
the forfeiture of any proceeds or property derived from violations of
the EEA, and may order the forfeiture of any property used to commit
or to facilitate the commission of the crime. While the EEA does not
provide for civil forfeiture proceedings, it does authorize the government
to file a civil action seeking injunctive relief.
Victims of trade secret thefts are often faced with the dilemma that
by reporting the matter to law enforcement authorities the trade secret
may be publicly revealed during criminal prosecution. In an effort to
preserve the confidentiality of a trade secret, the EEA provides for
the continued status of information as a trade secret and will prevent
the unnecessary and harmful disclosure of such information.
The EEA should serve as a powerful deterrent and is a very important
law enforcement and security management tool for protecting intellectual
property rights. The EEA is not intended to convert all thefts of trade
secrets into criminal cases; however, the EEA substantially raises the
stakes in the arena of economic espionage.
The development and production
of trade secret information is an integral part of virtually every aspect
of United States trade, commerce, and business. Hence, the security of
trade secrets is essential to maintaining the health and competitiveness
of critical segments of the US economy. The theft, misappropriation, wrongful
receipt, transfer, and/or use of US trade secrets and other economic information,
particularly by foreign governments and their agents or instrumentalities,
poses a direct threat to the health and competitiveness of the US economy.
The ever-increasing value of trade secret information in the global
and domestic marketplaces, and the corresponding spread of technology,
have combined to significantly increase both the opportunities and motives
for conducting economic espionage. As a consequence, foreign governments--through
a variety of means--actively target US persons, firms, industries, and
the US Government, to steal or wrongfully obtain trade secrets and other
S&T information and products in order to provide their own economic
and industrial sectors with a competitive advantage. This environment
presents a new set of threats to our national security and challenges
existing security, intelligence, counterintelligence, and law enforcement
organizations and missions.
Foreign economic and industrial interests, both government and private,
also collect economic information from US firms through standard business
practices such as mergers and acquisitions, strategic alliances, and
licensing agreements as well as gathering publicly available information.
Although these activities are an accepted element of the business world
and are largely peripheral to the scope of this report, a large body
of reporting indicates that these activities generate a considerable
portion of the technology and economic information obtained by our competitors.
However, these activities clearly do not constitute illegal behavior.
Open-source collection activities include, but are not limited to,
review of trade journals or corporate annual reports, market surveys,
and attending conferences and symposia. Similarly, joint ventures and
licensing agreements provide ideal opportunities to gather nonpublic
information from US firms. In some instances, these types of collection
efforts could be a precursor to illicit collection activities and may
indicate the intelligence interest of foreign powers. At minimum, such
activities and data gathered may be exploited by commercial and government
analysts, research and development specialists, and officials involved
with investments, acquisitions, and competitive marketplace negotiations--potentially
to the disadvantage of US and private-sector interests.
are making corporate spying and theft easier and cheaper. Industrial espionage
is most often carried out to gain access to corporate strategic plans,
research and development information, and manufacturing process data.
The power of computer technology has increased means for the theft and
transfer of trade secret information. Computer age communications connectivity,
commercial enterprise activities, and the posting and accessibility of
corporate data on office workstations and home personal computers have
made it extremely easy to copy and transfer valuable trade secret information
surreptitiously. The theft of trade secrets--which encompasses all forms
and types of financial, business, scientific, technical, economic and
engineering information--is now a federal offense covered under the Economic
Espionage Act of 1996.
Under the current counterintelligence guidance, the FBI has foreign
counterintelligence responsibility in two areas directly related to
economic and industrial espionage. The first area of responsibility
is implementing counterintelligence programs designed to protect technologies
listed on the National Critical Technologies List published by the Department
of Commerce. Second, the FBI is tasked with investigating collection
activities conducted by foreign intelligence services and industrial
spies intended to gain access to trade secrets whose loss would undermine
the strategic industrial position of the United States.
In recent years, several high-profile cases have involved foreign
industrial espionage against US corporations. US companies targeted
in the past have included: IBM, Corning, Inc., Honeywell Corporation,
Eastman Kodak, 3M Corporation, AT&T, and General Electric. Most
recently, in January 1997, under the Uniform Trade Secrets Act, General
Motors won a $100 million settlement against a foreign automobile manufacturer
for the activities of a General Motors executive who, in his move to
the foreign firm, allegedly took with him plans for an advanced assembly
line and other proprietary information.
The continued loss of trade secrets in key, high-technology industries
could, over time, threaten the national security interests of the United
States, and result in the loss of jobs and economic opportunity. Many
US companies spend 25 to 30 percent of their budgets on research and
development in hopes that they can develop products that will provide
an edge in global markets.
It is difficult to assess
the dollar loss as a result of economic espionage and the theft of trade
secrets. The US Intelligence Community has not systematically evaluated
the costs. The extent of the economic intelligence operations targeting
US industries is especially difficult to ascertain. United States industry
is reticent about publicly acknowledging cases of possible breaches of
corporate security by their own employees, foreign intelligence services,
or foreign competitor organizations. Nonetheless, recent studies by the
US private sector estimate that the loss to businesses from theft and
misappropriation of proprietary information runs in the billions of dollars
each year. In particular, in its March 1996 study, The American Society
for Industrial Security estimated that the potential losses from foreign
and domestic trade secret theft for all American industry could amount
to $2 billion a month.
The FBI and other members
of the counterintelligence community have reported that foreign intelligence
activities directed at US critical technologies pose a significant threat
to US national security. According to these agencies, even certain US
allies are actively attempting to obtain US information through unauthorized
means. During the past year, the US counterintelligence community has
specifically identified the suspicious collection and acquisition activities
of foreign entities from at least 23 countries. Of these, 12 have been
identified as the countries most actively targeting trade secret information.
countries are assessed to be the most aggressive in collection efforts
directed against US proprietary economic information and critical technologies.
In addition to overt and legal information-gathering activities, these
countries are willing to employ clandestine and illegal methods to collect
against US interests.
The number and identity of the 12 countries assessed by NACIC to be
most actively targeting US information has not changed since the 1996
Annual Report, and as indicated last year, has increased only
slightly from 10 to 12 countries since the 1995 Annual Report.
It should be noted that the current list of 12 countries does not reflect
the full picture of targeting against US economic interests--only the
most serious threat.
Counterintelligence community updates reaffirmed the 1996 Annual
Report findings. Reporting agencies cited a substantial amount of
suspicious activity potentially involving economic and industrial espionage
and/or intelligence collection. It is important to note that preliminary
identification of a foreign entity does not prove knowledge or sponsorship
by the government of that country. Despite this fact, the number and
frequency of these cases, as seen below, reflects the need for greater
Based on US defense industry reporting of suspicious activity, the
Defense Investigative Service (DIS) has continued to observe trends
of low-level collection interest and activity by foreign companies and
governments. Traditional threat countries continued their collection
activities. The counterintelligence community also observed continued
collection by nontraditional threat countries. According to DIS, as
the frequency and numbers of suspicious reports from cleared contractors
continued to grow in 1996, the number of different countries involved
in some form of suspicious contact also grew. Although the numbers of
reported incidents and countries increased in 1996 over that reported
by DIS in 1995, these incidents have been referred to the appropriate
Intelligence Community agencies for investigation and analysis. Outcomes
of these investigations remain pending and no conclusive judgments are
possible at this time.
Foreign collection continues
to focus on US proprietary economic and technical information and products.
Further, programs associated with dual-use technologies, those that can
be used for both military and civilian applications, are consistent targets
for both foreign government and foreign commercially sponsored collection
A 1996 DIS summary of foreign contacts indicated that numerous foreign
countries displayed some type of suspicious interest in one or more
of the 18 technology categories listed in the Military Critical Technology
List (MCTL), which is published by the Department of Defense. These
major technology categories include:
- Aeronautics systems.
- Armaments and energetic materials.
- Chemical and biological systems.
- Directed and kinetic energy systems.
- Ground systems.
- Guidance, navigation, and vehicle control.
- Information systems.
- Information warfare.
- Manufacturing and fabrication.
- Marine systems.
- Nuclear systems.
- Power systems.
- Sensors and lasers.
- Signature control.
- Space systems.
- Weapons effects and countermeasures.
The majority of the technologies included in the MCTL are dual use.
As a result, the loss or compromise of proprietary or embargoed information
concerning these technologies can affect both the economic and national
security of the United States.
According to the Department of Energy (DOE), foreign researchers have
gained fully sanctioned access to numerous sensitive technologies during
preapproved visits and assignments to DOE facilities. (4) According
to the most recent DOE information, approximately 50,000 foreigners
visited DOE facilities during 1994 and 1995. Such a volume of visitors,
although legal and officially arranged, can present significant security
concerns if sound risk management is not practiced. The pursuit of access
to a particular program, technology, or US specialist by visiting researchers
may be an espionage precursor.
DOE information indicates that the most frequently accessed sensitive
technologies in 1994 and 1995 were ceramics, cermets, (5) and
refractories, (6) which
were accessed 148 times in 1994, and 155 times in 1995. DOE has specifically
identified six additional sensitive technologies that have been accessed
by foreign countries believed to engage in economic collection. These
technologies are advanced automotive propulsion, composite materials,
nuclear radiation sources, safeguards, superconductivity, and uranium
The most frequently accessed "nonsensitive technologies" by foreign
visitors and assignees to DOE facilities were environmental sciences-terrestrial
in 1994, and biomedical sciences-basic studies in 1995.
According to DOE's most recent statistics, the four DOE facilities
that host the most foreign visitors and assignees are Oak Ridge National
Laboratory, Lawrence Livermore National Laboratory, Argonne National
Laboratory-East, and Pacific Northwest Laboratory.
In addition, counterintelligence community reporting continues to
reflect increasing trends of foreign collection activity involving proprietary
strategic management information, to include bid proposals, price structuring,
trade developments, marketing plans, and proposed US legislation affecting
foreign firms operating in the United States.
In addition to trade
secrets obtained from employees or company documents and publications,
US Government and private-sector computer networks present an increasingly
attractive target for illicit activities. Computer intruders can move
freely without reference to state borders and can perform their tasks
without gaining physical access to the system under attack. These factors
make it more difficult to detect the theft of information and the origin
of the intruder. Aside from stealing information, a computer intruder
can also introduce a "virus" into a competitor's computer system to sabotage
According to a study conducted by the Computer Security Institute
(CSI), a San Francisco-based association of information security professionals,
computer crimes are soaring, and companies should be on the alert for
security breaches. The 1997 Computer Crime and Security Survey
was conducted by CSI in cooperation with the FBI's International Computer
Crime Squad in San Francisco. Both CSI and the FBI stated that the results
of this survey will be used to better understand the threat of computer
crime and provide law enforcement with some basic information with which
to address the problem more effectively.
According to the survey, about 75 percent of the 563 responding corporations,
government agencies, financial institutions and universities surveyed
by CSI reported financial losses in the past 12 months. Last year financial
losses from financial fraud, computer viruses, sabotage, and theft of
proprietary information and laptops were up seven percent and topped
$100 million. Reflecting the increased competition in the global marketplace,
over 50 percent of the respondents cited foreign competitors as a likely
source of attack and 22 percent cited foreign governments as a likely
source of attack.
The survey also showed that only 17 percent of the respondents reported
crimes to law enforcement authorities. There appears to be reluctance
on the part of the private sector to report allegations of computer
and economic crime to law enforcement authorities. A large number of
these crimes go unreported because of a company's fear of undermining
the confidence of their shareholders, negative publicity, and further
exposure of trade secret information during prosecution.
The FBI, in response to an expanding number of instances in which
criminals have targeted major components of information and economic
infrastructure systems, employs International Computer Crime Squads
in selected offices throughout the United States. These squads investigate
violations of the Computer Fraud and Abuse Act of 1986, including major
computer network intrusions, privacy violations, industrial espionage,
pirated computer software, and other crimes where the computer is a
major factor in committing the criminal offense.
As a result of its 1994 Economic Counterintelligence Program, the
FBI has developed a growing volume of information on foreign economic
threats including the identification of those countries who pose these
threats, their targets, and the methods they use. In response to the
increase in computer crimes, the FBI established a Computer Investigations
and Infrastructure Threat Assessment Center (CITAC) to provide analysis
and support to all levels of the criminal justice system.
The Department of Defense (DOD) has received substantial Congressional
funding for program initiatives in 1996 and 1997 to create a DOD Computer
Investigations Training Facility (DODCITF) and a DOD Computer Forensics
Laboratory (DODCFL). The DODCITF and the DODCFL will address the increasing
risk of computer-based threats to defense technologies and military
readiness. These DOD initiatives respond to the exponential growth in
DOD's reliance on computer networks and the increased risks posed by
computer intrusions; the growing number of computer-related incidents
and investigations within the DOD; and the increasing volume of computer
evidence collected and analyzed by DOD investigative organizations.
Because of the growing use of the Internet for commercial and financial
transactions, more opportunities will be available for the computer
intruder. While no security system is guaranteed to provide absolute
protection, additional efforts in the area of information security could
prevent substantial losses.
Practitioners of economic
and industrial espionage seldom use one method of collection; rather,
they combine a number of collection techniques into a concerted collection
effort that combines legal and illegal, traditional, and more innovative
espionage methods, such as agent recruitment, US volunteers and co-optees,
surreptitious entry, theft, SIGINT intercept, computer penetration, and
other specialized technical operations continue to be used by foreign
intelligence services targeting US interests.
In addition to traditional
espionage and other illegal activities, foreign governments, instrumentalities,
and agents gather economic intelligence via numerous other methods. These
methods involve legitimate practices that do not constitute illicit activity.
While foreign governments and their entities have been known to turn legitimate
transactions and business relationships into clandestine collection opportunities,
often the overt collection of economic information is practiced for legitimate
purposes. Although some of these legal activities may be a precursor to
clandestine or illegal collection, they do not of themselves constitute
evidence of illegal activity.
While most industry associations with foreign entities are in fact
economically advantageous to the United States, a DIS summary of 1996
suspicious contacts that were reported by defense contractors, indicated
that foreign entities employ a variety of legitimate collection methods
in attempting to acquire US proprietary economic information. Despite
the legitimate nature of these collection practices, they may be an
important element in a broader, directed intelligence-collection effort.
Last, the legitimate collection of economic information, in addition
to clandestine methods that constitute economic espionage, depict the
broad scope of a successful foreign economic intelligence-collection
Defense industry reporting continues to reflect increasing trends
of foreign collection activity. As reported by DIS, foreign intelligence
services and foreign private industries, which may or may not be sponsored
by a foreign government, employ the following legal collection methods.
According to DIS, the
most frequently reported method of operation (MO) used by foreign entities
is the unsolicited request for information. This method is simple, low
cost, nonthreatening and low risk. The unsolicited request for information
is a popular MO of countries against which the United States has imposed
an embargo and of foreign entities who may attempt to disguise the end
user through the use of front companies. A reported majority of suspicious
unsolicited requests for information involved data covered under the International
Traffic in Arms Regulations (ITAR) that could not be lawfully exported
without a license.
A growing number of incidents involve mail, fax, phone, and Internet
requests from a foreign entity to a cleared contractor. The Internet
provides a direct line of communication for foreign-collection efforts.
Internet access to a company's bulletin board, home page, and employees,
provides foreign collectors with many avenues through which they can
broaden their collection efforts.
Foreign collectors have also employed the use of marketing surveys
to solicit information that often exceeds generally accepted terms.
Surveys may solicit proprietary information concerning corporate affiliations,
market projections, pricing policies, purchasing practices, and types
and amounts of US Government contracts.
during visits was the secondmost frequently reported MO associated with
foreign-collection activity. Once in a facility, collectors may attempt
to manipulate the visit to satisfy their collection requirements. For
example, visitors may ask questions or request information that is outside
the scope of the approved visit. Unchecked, this MO usually results in
the loss of technology, and is therefore considered to be a damaging form
of collection activity.
Foreign individuals with
technical backgrounds may be solicited by, or may themselves seek to,
market their services to research facilities, academic institutions, and
even cleared defense contractors. This method of collection was reported
to the DIS with greater frequency during the past year. In addition, US
technical experts may be requested by foreign entities to visit a foreign
country and share their technical expertise. Usually associated with alleged
employment opportunities, there is also an increasing trend involving
"headhunters" who solicit information from targeted employees. In these
instances, such solicitation may be a ploy to access and gather desired
conventions, and seminars are rich targeting opportunities for foreign
collectors. These functions directly link programs and technologies to
knowledgeable personnel. At these venues, foreign collectors target US
scientists and businessmen to gain insights into US products and capabilities.
Consequently, US defense industry reporting indicates that collection
activity at these events is usually expected, is commonplace, and most
often involves overt open-source intelligence gathering.
The counterintelligence community has increasingly sought to make
the private sector aware of the foreign collection threat and has conducted
threat awareness briefings prior to such international symposia. Specific
examples include counterintelligence and security awareness briefings
for US industry representatives who planned to attend or support the
Paris and Farnborough International Air Shows.
Joint ventures, joint
research, and exchange agreements potentially offer significant collection
opportunities for foreign entities. As with other MOs, joint efforts place
foreign personnel in close proximity to US personnel and afford potential
access to S&T programs and information. Through joint-venture negotiations,
US contractors may reveal unnecessarily large amounts of technical data
as part of the bidding process. In addition, a number of governments use
front companies to gather intelligence and provide cover for intelligence
Despite the existence
of the Committee on Foreign Investments in the United States (CFIUS),
foreign acquisition of technology and companies in the US defense industry
continues to generate significant concerns regarding foreign access to
US markets and sensitive proprietary information. CFIUS reviews foreign
mergers and acquisitions of US firms to determine the impact on US national
security and provides guidance on arrangements with foreign governments
for advance consultations on prospective major foreign governmental investments
in the United States. However, while it is beneficial for a foreign entity
to notify CFIUS of its intent to purchase or merge with a US company that
holds classified DOD contracts, it is not mandatory. Foreign investors
in a US private-sector company need not notify CFIUS of their intentions.
Incidents involving the
co-opting of former employees who had access to sensitive proprietary
or classified S&T information remains a potential counterintelligence
concern. Frequently, foreign collectors will exploit cultural commonalties
to establish rapport with their target. As a result, foreign collectors
specifically target foreign employees working for US companies. Likewise,
US defense contractor employees working overseas may be particularly vulnerable
to foreign offers of employment as their contracts expire.
The openness of the American
society and the wealth of technical, scientific, political, and economic
information available through the open media provide US adversaries with
a vast amount of detailed, accurate, and timely information. The use of
open-source information as an intelligence source has a number of benefits.
It is relatively cheap to obtain, it is legal in the majority of instances,
and it makes up the greatest volume of information accessible to an intelligence
collector. Because of these benefits, open-source information has increasingly
been exploited by many foreign entities, to include foreign intelligence
services in an attempt to target the United States.
The global growth of the Internet has changed the accessibility and
ease with which foreign collectors can gather data. Reporting indicates
that foreign collectors have increased their direct connections with
Internet service providers. Information available through electronic
databases continues to expand as the number of databases and electronic
bulletin board systems available to the public continues to grow dramatically.
Bulletin board systems, some of which track sensitive US Government
activities or provide information on proprietary activities performed
by government contractors, have grown rapidly on the Internet.
Title 18 U.S.C. 1831 et. seq.
Sec. 1831 Economic Espionage
(a) In General.--Whoever, intending or knowing that the offense will
benefit any foreign government, foreign instrumentality, or foreign
- steals, or without authorization appropriates, takes, carries way
or conceals, or by fraud, artifice, or deception obtain a trade secret;
- without authorization copies, duplicates, sketches, draws, photographs,
downloads, uploads, alters, destroys, photocopies, replicates, transmits,
delivers, sends, mails, communicates, or conveys a trade secret;
- receives, buys, or possesses a trade secret, knowing the same to
have been stolen or appropriated, obtained or converted without authorization;
- attempts to commit any offense described in any of paragraphs (1)
through (3); or
- conspires with one or more other persons to commit any offense described
in any of paragraphs (1) through (3), and one or more of such persons
do any act to effect the object of the conspiracy, shall, except as
provided in subsection (b), be fined not more than $500,000 or imprisoned
not more than 15 years, or both.
(b) Organizations. Any organization that commits any offense described
in subsection (a) shall be fined not more than $10,000,000.
Sec. 1832 Theft of Trade Secrets
(a) Whoever, with intent to convert a trade secret, that is related
to or included in a product that is produced for or placed in interstate
or foreign commerce, to the economic benefit of anyone other than the
owner thereof, and intending or knowing that the offense will, injure
any owner of that trade secret, knowingly --
- steals, or without authorization appropriates, takes, carries away,
or conceals, or by fraud, artifice, or deception obtain such information;
- without authorization copies, duplicates, sketches, draws, photographs,
downloads, uploads, alters, destroys, photocopies, replicates, transmits,
delivers, sends, mails, communicates, or conveys such information;
- receives, buys, or possesses such information, knowing the same
to have been stolen or appropriated, obtained or converted without
- attempts to commit any offense described in paragraphs (1) through
- conspires with one or more other persons to commit any offense described
in paragraphs (1) through (3), and one or more such persons do any
act to effect the object of the conspiracy, shall, except as provided
in subsection (b), be fined under this title or imprisoned not more
than 10 years, or both.
(b) Any organization that commits any offense described in subsection
(a) shall be fined not more than $5,000,000.
Sec. 1833 Exceptions to prohibitions
This chapter does not prohibit --
- any otherwise lawful activity conducted by a governmental entity
of the United States, a State, or political subdivision of a State;
- the reporting of a suspected violation of law to any governmental
entity of the United States, a State, or a political subdivision of
a State, if such entity has lawful authority with respect to that
Sec. 1834 Criminal Forfeiture
(a) The court, in imposing sentence on a person for a violation of
this chapter, shall order, in addition to any other sentence imposed,
that the person forfeit to the United States --
- any property constituting, or derived from, any proceeds the person
obtained, directly or indirectly, as the result of such violation;
- any of the person's property used, or intended to be used, in any
manner or part, to commit or facilitate the commission of such violation,
if the court in its discretion so determines, taking into consideration
the nature, scope, and proportionality of the use of the property
in the offense.
(b) Property subject of forfeiture under this section, any seizure
and disposition thereof, and any administrative or judicial proceeding
in relation thereto, shall be governed by Section 413 of the Comprehensive
Drug Abuse Prevention and Control Act of 1970 (21 U.S.C. 853), except
for subsections (d) and (j) of such section which shall not apply for
forfeitures under this section.
Sec. 1835 Orders to Preserve Confidentiality
In any prosecution or other proceeding under this chapter, the court
shall enter such orders and take such other action as may be necessary
and appropriate to preserve the confidentiality of trade secrets, consistent
with the requirements of the Federal Rules of Criminal and Civil Procedures,
the Federal Rules of Evidence, and all other applicable laws. An interlocutory
appeal by the United States shall lie from a decision or order of a
district court authorizing or directing the disclosure of any trade
Sec. 1836 Civil Proceedings to Enjoin Violations
(a) The Attorney General may, in a civil action, obtain appropriate
injunctive relief against any violation of this section.
(b) The district courts of the United States shall have exclusive
original jurisdiction of civil actions under this subsection.
Sec. 1837 Applicability to Conduct Outside the United States
This chapter also applies to conduct occurring outside the United
States if --
- the offender is a natural person who is a citizen or permanent resident
alien, or organization organized under the laws of the United States
or a State or political subdivision thereof; or
- an act in furtherance of offense was committed in the United States.
Sec. 1838 Construction with Other Laws
This chapter shall not be construed to preempt or displace any other
remedies, whether civil or criminal, provided by United States Federal,
State, commonwealth, possession, or territory law for the misappropriation
of a trade secret, or to affect the otherwise lawful disclosure of information
by any Government employee under Section 552 of Title 5 (commonly known
as the Freedom of Information Act).
Sec. 1839 Definitions:
As used in this chapter--
- the term "foreign instrumentality" means any agency, bureau, ministry,
component, institution, association, or any legal, commercial, or
business organization, corporation, firm, or entity that is substantially
owned, controlled, sponsored, commanded, managed, or dominated by
a foreign government;
- the term "foreign agent" means any officer, employee, proxy, servant,
delegate, or representative of a foreign government;
- the term "trade secret" means all forms and types of financial,
business, scientific, technical, economic or engineering information,
including patterns, plans, compilations, program devices, formulas,
designs, prototypes, methods, techniques, processes, procedures, programs,
or codes, whether tangible or intangible, and whether or how stored,
compiled, or memorialized physically, electronically, graphically,
photographically, or in writing if --
(a) the owner thereof has taken reasonable measures to keep such
information secret; and
(b) the information derives independent economic value, actual
or potential from not being generally known to, and not being
readily ascertainable through proper means by, the public; and
- the term "owner," with respect to a trade secret, means the person
or entity in whom or in which rightful legal or equitable title to,
or license in, the trade secret is reposed.
CLERICAL AMENDMENT--The table of chapters at the beginning part 1
of Title 18, United States Code, is amended by inserting after the item
relating to Chapter 89 the following:
90. Protection of trade secrets ..........................................................1831.
REPORTS--Not later than 2 years and 4 years after the date of the
enactment of this Act, the Attorney General shall report to Congress
on the amounts received and distributed from fines for offenses under
this chapter deposited in the Crime Victims Fund established by Section
1402 of the Victims of Crime Act of 1984 (42 U.S.C. 10601).
definition of the term "trade secret" in the Economic Espionage Act is
very broad and generally includes all types of information, however stored
or maintained, which the owner has taken reasonable measures to keep secret
and which has independent economic value.
Economic Espionage Act of 1996 and its provisions are further
discussed in detail under a separate heading. A reproduction of the
Act can be found in the appendix of this report.
version of the report does not identify the specific countries. Each
CI agency provided NACIC with compilations of incidents and trends that
appeared to involve the targeting of US economic and industrial information
during the past year. NACIC, as coordinator, compiled a master list
of countries assessed to be the most aggressive collectors of US information.
Due to each CI agency's differing mission, investigative responsibilities,
and reporting criteria, one agency's list of foreign collectors could
differ from that of another. NACIC's analytic effort in compiling a
master list sought to ensure the integrity of submitted data and consistency
with the assessment criteria used in its initial 1995 Annual Report.
sensitive technology is an unclassified subject/topic identified by
DOE that involves information, activities, and/or technologies that
are relevant to national security. Disclosure of sensitive subjects
has the potential for enhancing foreign nuclear weapons capabilities,
divulging military critical technologies, or revealing other advanced
heat-resistant, bonded mixture of ceramic material and a metal used
in gas turbines, nuclear reactor mechanisms, and rocket motors, and
hard to melt substances such as ores and metals.