U.S. launches effort to stem trade-secret theft

February 20, 2013

The Obama administration warned Wednesday that it will launch new efforts to persuade China and other countries to halt the theft of billions of dollars’ worth of U.S. trade secrets.

The threat to place offender countries on a watch list and other steps are part a broader effort by the administration to coordinate with other nations to fight the growing theft of intellectual property.

“State sponsored trade-secret theft . . . embattles our status as world leader in innovation,” Victoria Espinel, White House coordinator of intellectual-property enforcement, said at a strategy rollout.

The new effort comes amid heightened attention to the issue of cyber-espionage directed at commercial targets, especially by China. This week, an Alexandria cybersecurity firm issued a report accusing the Chinese government of massive hacking campaigns against U.S. targets and President Obama recently issued an executive order aimed at better securing the computer networks of critical industries such as energy.

Officials said they will urge other countries that are also targets of trade-secret theft to join in pressuring offender states to stop the pilfering.

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Senior administration officials also will continue to raise the issue of data theft and espionage in high-level meetings with their counterparts. Within the past year, Obama, Defense Secretary Leon E. Panetta and then-Secretary of State Hillary Rodham Clinton raised the issue of economic cyber-espionage with their Chinese counterparts.

“Our message is quite clear: The protection of intellectual property and trade secrets is critical to all intellectual property rights holders, whether they be from the United States or whether they be from Chinese companies or other companies around the world,” Robert D. Hormats, undersecretary of state for economic growth, energy and the environment, said at the event.

Though China is regarded as the most aggressive actor, Hormats said other countries are guilty as well. He cited Russia and India as two countries active in the theft of intellectual property.

While officials said they are concerned about traditional means for stealing commercial secrets, through tactics such as recruiting current or former employees, they said cyberspace is an increasingly important avenue for espionage.

“A hacker in China can acquire source code from a software company in Virginia without leaving his or her desk,” Attorney General Eric H. Holder Jr. said. “With a few keystrokes, a terminated or simply unhappy employee of a defense contractor can misappropriate designs, processes and formulas worth billions of dollars.”

He said the Justice Department has made prosecution of trade-secret theft a top priority. The department is seeking to bring cases of economic cyber-espionage that officials hope will deter foreign governments from hacking U.S. company networks.

Plans also call for federal law enforcement to pursue stronger agreements with foreign counterparts to pursue investigations in their own countries.

The strategy drew mixed reviews.

“Finally the White House has come into the open in its calls against other nations’ stealing of trade secrets,” said Jason Healey, director of the Atlantic Council’s Cyber Statecraft Initiative. “Treating this as an international trade issue to be coordinated with our allies and other like-minded nations is a particularly good idea.”

But the strategy contains few new initiatives, he said, pointing out that the underlying report uses the word “continue” more than 20 times.

He called for more specific steps, such as denial of visas to officials from foreign companies that benefit from the theft of U.S. trade secrets and blacklisting the firms from U.S. government contracts.

Peter Toren, a former federal prosecutor, said the government should pursue economic cyber-espionage cases, despite the challenges of proving who is responsible and extraditing suspects, to send a signal that “we’re taking this very seriously.”

Toren, a computer crimes expert with the Washington law firm of Weisbrod Matteis & Copley, said new laws are needed to give private parties the right to sue foreign companies in federal court for trade-secret theft.

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