Industrial Espionage

Rachael Riggs

Henley-Putnam

National American University

Industrial Espionage

Industrial espionage is the process of a foreign company attempting to gain confidential information such as trade secrets, blueprints, plans, and other private informaton from a U.S. company. The espionage is accomplished through trespassing onto a company's property, hacking into a company’s computer network, posing as an employee, and paying an employee for classified information.

The 2017 IP Commission Report estimates the “cost to the U.S. economy continues to exceed $225 billion in counterfeit goods, pirated software, and theft of trade secrets and could be as high as $600 billion." annually. The report goes on to say, "We have found no evidence that casts doubt on the estimate provided by the Office of the Director of National Intelligence in November 2015 that economic espionage through hacking costs $400 billion per year.” That brings the total loss in economic damage from industrial espionage to over $1.2 trillion. (The National Bureau of Asian Research, 2017)

A company’s trade secrets can be 80% of the value of a company’s information portfolio. These trade secrets are highly valuable to the person attempting to steal this knowledge for profit.

Cyber espionage has reached epic levels. The U.S. Chamber of Commerce estimates the cost of cybercrime is likely at $24 billion- $120 billion in the United States. (U.S. Chamber of Commerce) China, Russia, and Iran are the most significant threats to the United States when it comes to cybercrime that is related to economic espionage. This type of espionage against the U.S. poses a “significant threat to America’s prosperity, security, and competitive advantage” (NATIONAL COUNTERINTELLIGENCE AND SECURITY CENTER, 2018)

The areas of the highest interest and are most prone to espionage include biotechnology, Energy /Alternative Energy, Environmental Protection, defense technology, high-end manufacturing, and Information and Communications Technology. The loss of information, such as those mentioned, could leave our country in a vulnerable state. The best practices are to defend against any attack beforehand. Once the enemy obtains the information, it is much too late. Ways to accomplish this include a broader awareness, a more secure cyber system, risk assessments, and knowledge sharing. With enough effort, the hope is to minimize this current epidemic.

China is the most substantial threat to the United States when referring to industrial espionage toward the United States as a whole. They take information from U.S. companies and manufacture products in cheaper ways to sell the product for less expensive. This act takes profit away from the original company and costs the U.S. billions. Other than being the largest exporter of counterfeit items into our country, China's goals include science and technology advancement, military modernization, and economic policy objectives.China conducts industrial espionage upon the U.S. to help further these goals.

Consumer education on the effects of this should be one of the first things to address. Many citizens do not understand the effects of industrial espionage or that it even exists. The results of it are also mostly unknown to the general public. In addition to public awareness, employees of such companies need to receive proper training in economic espionage and how to protect information as well as how to protect themselves from potentially becoming a victim of such espionage.

Though China, Russia, and Iran remain the United State's biggest current threats concerning economic espionage. Many other countries still are likely to utilize this type of espionage against the United States. The FBI has been working to eradicate potential opportunities for this type of espionage. The FBI will work with companies in their investigative efforts and help maintain the company’s credibility through the entire process. (Coleman, n.d.)

The 2019 IP Commission’s updated report lists a few recommendations. The recommendations included in this report are:

• Build independent international database for scoring of entities from foreign countries that pose IP risk
• Use the emergency economic powers already granted to the president to deny access to the U.S. market and banking system to foreign entities found to be directly benefitting from the theft of American IP
• Deny access to the banking system to foreign entities that use or benefit from the theft of American IP
• Enforce strict supply-chain accountability for the U.S. government
• Require the Securities and Exchange Commission to judge whether companies’ use of stolen IP is a material condition that ought to be publicly reported
• Instruct the Federal Trade Commission to obtain meaningful sanctions against foreign companies using stolen IP
• Coordinate investment and export controls
• Quickly intercept counterfeit goods
• Streamline the process for reporting and responding to IP theft
• Establish multilateral policy dialogues
• Utilize multilateral institutions to harmonize national and international legal and regulatory frameworks (The IP Commission, 2019)

Exploratory

In my Inquiry process on the subject of industrial espionage, I first explored the FBI’s website in relation to the topic watching the “Company Man” video (FBI, 2015) and reading articles such as the one titled “Brookline Man Sentenced for Foreign Economic Espionage” (U.S. Attorney's Office District of Massachusetts, 2011) and “Espionage in the Defense Industry” (FBI History Famous Cases, n.d.)

I did a google search with the search term "industrial espionage." The results lead me to the American Bar Association website with an article titled “Economic Espionage in 2017 and Beyond: 10 Shocking Ways They Are Stealing Your Intellectual Property and Corporate Mojo”.(Kahn, 2017) Within this article, I noticed many excellent sources, most specifically was the reference to a report by the Commission on the Theft of American Intellectual Property. I began researching this and found my source @ (The National Bureau of Asian Research, 2017)

I read through a few of the sources within the ABA article website as well as the intellectual property updated report. This report referenced the U.S. Chamber of Commerce which I used as a source (U.S. Chamber of Commerce)

I found many of the sources within my sources to have fascinating and reliable information. Other articles and websites that I found in my research include: "What is corporate espionage? Inside the murky world of private spying” (Fruhlinger, 2018) the Department of Justice (Department of Justice, 2018) and the ECONOMIC ESPIONAGE ACT OF 1996 (Public Law 104–294104th Congress, 1996)

Upon researching information concerning Industrial Espionage, I learned a large amount of information that I did not know before. I had thought that most types of espionage concerning companies mainly dealt with financial matters. This module has taught me a lot and brought a much broader understanding of the issue and the problems associated with it. Because of the knowledge gained this week, I now understand why Chinese shopping websites can sell their products at much lower prices. I also realize the risks associated with the theft of company information and how it affects both the company involved and the United States.

With the knowledge I have gained, I will think differently about my future purchases. I will no longer use specific apps and websites that I may have used in the past. The understanding and knowledge of this will change the way I shop, as well as the items I purchase. I have gained a larger appreciation for the value of a company and its product. (Purdue University, n.d.)

Industrial Espionage is a massive issue within our country, and the financial loss associated with this kind of espionage is on a massive scale. Many actions need to be taken to counter this activity, but bringing awareness and knowledge of the activity itself and the effects of it are priority steps that should be taken on the matter.

.

References

Coleman, R. (n.d.). Counterintelligence Division's Randy Coleman Describes Economic Espionage. Retrieved from FBI: https://www.fbi.gov/video-repository/newss-the-company-man-interview-with-randy-coleman-counterintelligence-division/view

Department of Justice. (2018). SUMMARY OF MAJOR U.S. EXPORT ENFORCEMENT, ECONOMIC ESPIONAGE,AND SANCTIONS-RELATED CRIMINAL CASES. Washington D.C. Retrieved from Department of Justice: https://www.justice.gov/nsd/page/file/940591/download

Dictionary.com. (n.d.). Dictionary.com. Retrieved from Dictionary.com: www.dictionary.com

Dulles, A. W. (2006). The Craft of Intelligence. Guilford: The Lyon Press.

FBI. (2015, July 23). Economic Espionage: FBI launches nationwide awareness campaign. Retrieved from FBI: https://www.fbi.gov/news/stories/economic-espionage

FBI History Famous Cases. (n.d.). Espionage in the Defense Industry. Retrieved from FBI history: https://www.fbi.gov/history/famous-cases/espionage-in-the-defense-industry

Fruhlinger, J. (2018, July 2). What is corporate espionage? Inside the murky world of private spying. Retrieved from CSO United States: https://www.csoonline.com/article/3285726/what-is-corporate-espionage-inside-the-murky-world-of-private-spying.html

Kahn, R. A. (2017, May 18). Economic Espionage in 2017 and Beyond: 10 Shocking Ways They Are Stealing Your Intellectual Property and Corporate Mojo. Retrieved from American Bar Association : https://www.americanbar.org/groups/business_law/publications/blt/2017/05/05_kahn/

NATIONAL COUNTERINTELLIGENCE AND SECURITY CENTER. (2018). Foreign Economic Espionage in Cyberspace. Retrieved from https://www.dni.gov/files/NCSC/documents/news/20180724-economic-espionage-pub.pdf

Public Law 104–294104th Congress. (1996). ECONOMIC ESPIONAGE ACT OF 1996. Senate and House of Representatives of the United States of America, Washington D.C. Retrieved from https://www.govinfo.gov/content/pkg/PLAW-104publ294/pdf/PLAW-104publ294.pdf

Purdue University. (n.d.). Organizing an Exploratory Essay. Retrieved from Purdue University: https://owl.purdue.edu/owl/general_writing/common_writing_assignments/exploratory_papers/organizing_an_exploratory_essay.html

The IP Commission. (2019). ip commission 2019 review. Washington D.C. Retrieved from http://www.ipcommission.org/report/ip_commission_2019_review_of_progress_and_updated_recommendations.pdf

The National Bureau of Asian Research. (2017, February). Update to the IP Commission report. Retrieved from The Commission on the Theft of American Intellectual Property: http://ipcommission.org/report/IP_Commission_Report_Update_2017.pdf

U.S. Attorney's Office District of Massachusetts. (2011, December 19). Brookline Man Sentenced for Foreign Economic Espionage. Retrieved from FBI: https://archives.fbi.gov/archives/boston/press-releases/2011/brookline-man-sentenced-to-for-foreign-economic-espionage

U.S. Chamber of Commerce. (n.d.). The Case for Enhanced protection of Trade Secrets in the Trans-Pacific Partnership agreement. Washington DC: Covington and Burling LLP. Retrieved from U.S. Chamber of Commerce: https://www.uschamber.com/sites/default/files/legacy/international/files/Final%20TPP%20Trade%20Secrets%208_0.pdf