[Congressional Record Volume 142, Number 14 (Thursday, February 1, 1996)]
[Senate]
[Pages S741-S742]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SPECTER (for himself and Mr. Kohl):
  S. 1557. A bill to prohibit economic espionage, to provide for the 
protection of United States vital proprietary economic information, and 
for other purposes; to the Select Committee on Intelligence.


                   THE ECONOMIC SECURITY ACT OF 1996

 Mr. SPECTER. Mr. President, I am introducing a bill today, 
along with my colleague, Senator Kohl, entitled the ``Economic Security 
Act of 1996,'' which amends the National Security Act of 1947 to 
protect against the theft of vital proprietary economic information by 
or for foreign governments.
  The bill would punish those who steal vital proprietary economic 
information from a U.S. owner for the benefit of a foreign government 
or a corporation, institution, instrumentality, or agent that is owned 
or guided by a foreign government. It provides penalties of up to 
$500,000 in fines or 25 years in prison, except that corporations 
working on behalf of a foreign government can be fined up to 
$10,000,000. The law would ensure that fruits of the espionage would be 
forfeited, and that victims would receive some restitution from funds 
recovered. This bill also provides for a ban for up to 5 years on the 
importation into, or export from, the United States of any product 
produced, made, assembled, or manufactured by a person convicted under 
this provision.
  To address concerns by industry that criminal proceedings might 
result in the disclosure of the very trade secret the prosecution is 
aimed at protecting, the bill also gives courts authority to enter 
protective orders and take any other such measures as may be necessary, 
consistent with the applicable rules and laws. It also provides for an 
interlocutory appeal by the United States from a decision or order of a 
district court authorizing the disclosure of vital proprietary economic 
information.
  The bill provides for extraterritorial jurisdiction where the 
offender is a U.S. person or the victim of the offense is a U.S. owner 
and the offense was intended to have, or had, a direct or substantial 
effect in the United States. In addition, the bill adds this newly 
created crime to the list of offenses in title 18, chapter 119, of the 
United States Code--Wire and Electronic Communications Interception and 
Interception of Oral Communications--so that it may be investigated 
with authorized wire, oral, or electronic intercepts.
  We have drafted this new provision as an amendment to the National 
Security Act of 1947 to emphasize the importance of this issue to the 
national security of our Nation. Anyone who doubts that this is a 
national security issue need only stop to consider why foreign 
governments would devote so much effort to obtaining this information 
from U.S. companies. The reality is that U.S. economic and 
technological information may be far more valuable to a foreign 
government than most of the information that is classified in the 
United States today. The March 1990 and February 1995 national security 
strategies published by the White House focus on economic security as 
an integral part not only of U.S. national interest but also of 
national security.
  Economic espionage by foreign governments targeting U.S. industry and 
innovation is an issue the Senate Select Committee on Intelligence has 
been examining for some time. The Committee has held a number of 
hearings which addressed this issue and has met extensively with the 
intelligence and law enforcement communities. In 1992, then-Director of 
Central Intelligence Robert M. Gates told the Committee:

       We know that some foreign intelligence services have turned 
     from politics to economics and that the United States is 
     their prime target. We have cases of moles being planted in 
     U.S. high-tech companies. We have cases of U.S. businessmen 
     abroad being subjected to bugging, to room searches, and the 
     like * * * [W]e are giving a very high priority to fighting 
     it.

  This reflects a shift from the traditional counterintelligence 
efforts directed at military, ideological, or subversive threats to 
national security. Beginning as early as 1990, the Intelligence and 
Counterintelligence Communities have been directed to detect and deter 
foreign intelligence targeting of U.S. economic and technological 
interests, including efforts to obtain U.S. proprietary information 
from companies and research institutions that form our strategic 
industrial base. These counterintelligence efforts, however, must be 
complemented by, and carefully coordinated with, a coherent and 
rigorous law enforcement effort. It is to strengthen this aspect of the 
fight against economic espionage that I introduce this bill today. 

[[Page S742]]


  Some foreign governments have been quite open about the importance 
they attach to obtaining U.S. commercial secrets. Former French 
Intelligence Director Pierre Marion, for example, was quoted in a 
recent Foreign Affairs article as saying about the French-United States 
relationship: ``In economics, we are competitors, not allies. America 
has the most technical information of relevance. It is easily 
accessible. So naturally your country will receive the most attention 
from the intelligence services.''
  It is important to emphasize that no one country can be singled out 
for engaging in economic espionage. While there are a handful of well-
publicized incidents involving a few countries, the problem is actually 
much more widespread. FBI tells us that 23 countries are being actively 
investigated and that there has been a 100 percent increase in the 
number of investigative matters relating to economic espionage in the 
United States during the past year--from 400 to 800. Thus, this bill is 
not aimed at any one country, or even a handful of countries. It is 
designed to address a widespread threat from a broad spectrum of 
countries, including traditional counterintelligence adversaries and 
traditional allies.
  Last year, the Congress included in the Intelligence Authorization 
Act for fiscal year 1995 a requirement that the President submit an 
annual report on the activities of foreign governments to obtain 
commercial secrets from U.S. companies and how the U.S. Government 
counters this threat. The Intelligence Committee received the first 
report in July 1995, accompanied by a classified annex.
  According to the report, prepared by the National Counterintelligence 
Center in coordination with relevant agencies, ``economic and 
technological information is often not specifically protected by 
Federal laws, making it difficult to prosecute thefts of propriety 
technology or intellectual property. Law enforcement efforts instead 
must rely on less specific criminal laws--such as espionage, fraud and 
stolen property, and export statutes--to build prosecutable cases.'' At 
our request, the FBI has provided some examples of the difficulties 
caused by this patchwork of laws.
  According to the Bureau, there have been three specific declinations 
of prosecution over the past year. In the first, passage to a foreign 
power of proprietary economic information was declined for lack of a 
specific statute. In the second case, the unauthorized disclosure of a 
confidential U.S. Trade Representative document was not prosecuted 
because the document was not considered to contain ``national defense 
information'' as required by the espionage statute. In a third case, a 
foreign government-owned corporation attempted to use its position of 
power after a merger to gain access to proprietary economic information 
despite a specific prohibition in the sales agreement which would have 
provided for a ``Chinese wall'' between the foreign government 
corporation and the information. Again, the U.S. Attorney declined to 
prosecute because of the lack of a specific statutory basis. These 
examples do not include cases that were not fully investigated because 
of the lack of adequate statutory basis.
  A legal review by the Administration has shown that there is 
currently no specific criminal statute that would apply to many of the 
800 cases involving 22 foreign countries currently being investigated.
  The National Counterintelligence Center Report states that ``the 
aggregate losses that can mount as a result of [Foreign economic 
espionage] efforts can reach billions of dollars per year constituting 
a serious national security concern.'' Determining the full qualitative 
and quantitative scope and impact of economic espionage is difficult. 
Industry victims have reported the loss of hundreds of millions of 
dollars, lost jobs, and lost market share. However, U.S. industry may 
in fact be under-reporting these occurrences because of the negative 
impact publicity of a loss could have on stock values and customers' 
confidence, as well as the risk of broader exposure of the trade secret 
itself.
  The industries that have been the targets in most cases of economic 
espionage, according to this report, include those ``of strategic 
interest to the Untied States because they produce classified products 
for the Government, produce dual use technology used in both the public 
and private sectors, and are responsible for leading-edge technologies, 
critical to maintaining U.S. economic security.''
  Mr. President, these are complex issues and I do not assume that this 
bill represents the prefect solution. However, I believe this bill 
represents a reasonable and carefully tailored approach to addressing 
an issue of tremendous importance.

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