[Congressional Record Volume 142, Number 128 (Tuesday, September 17, 1996)]
[House]
[Pages H10460-H10462]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
ECONOMIC ESPIONAGE ACT OF 1996
Mr. BUYER. Mr. Speaker, I move to suspend the rules and pass the bill
(H.R. 3723) to amend title 18, United States Code, to protect
proprietary economic information, and for other purposes, as amended.
The Clerk read as follows:
H.R. 3723
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Economic Espionage Act of
1996''.
SEC. 2. PROTECTION OF TRADE SECRETS.
(a) In General.--Chapter 31 of title 18, United States
Code, is amended by adding at the end the following:
``Sec. 670. Protection of trade secrets
``(a) Offense.--Whoever--
``(1) with the intent to, or with reason to believe that
the offense will, benefit any foreign government, foreign
instrumentality, or foreign agent; or
``(2) with the intent to divert a trade secret, that is
related to or is 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 with the
intent to, or with reason to believe that the offense will,
disadvantage any owner of that trade secret;
wrongfully copies or otherwise controls a trade secret, or
attempts or conspires to do so shall be punished as provided
in subsection (b).
``(b) Punishment.--
``(1) Generally.--The punishment for an offense under this
section is--
``(A) in the case of an offense under subsection (a)(1), a
fine under this title or imprisonment for not more than 25
years, or both; and
``(B) in the case of an offense under subsection (a)(2), a
fine under this title or imprisonment for not more than 15
years.
``(2) Increased maximum fine for organizations.--If an
organization commits an offense--
``(A) under subsection (a)(1), the maximum fine, if not
otherwise larger, that may be imposed is $10,000,000; and
``(B) under subsection (a)(2), the maximum fine, if not
otherwise larger, that may be imposed is $5,000,000.
``(c) Definitions.--As used in this section--
``(1) 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;
``(2) the term `foreign agent' means any officer, employee,
proxy, servant, delegate, or representative of a foreign
government;
``(3) 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
``(4) 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.
``(d) Criminal Forfeiture.--
``(1) Notwithstanding any other provision of State law, any
person convicted of a violation under this section shall
forfeit to the United States--
``(A) any property constituting, or derived from, any
proceeds the person obtained, directly or indirectly, as the
result of such violation; and
``(B) 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.
``(2) The court, in imposing sentence on such person, shall
order, in addition to any other sentence imposed pursuant to
this section, that the person forfeit to the United States
all property described in this section.
``(3) Property subject to forfeiture under this section,
any seizure and disposition thereof, and any administrative
or judicial proceeding in relation thereto, shall be governed
by the provisions of 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 to forfeitures under this section.
``(e) Orders To Preserve Confidentiality.--In any
prosecution or other proceeding under this section, 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 Procedure, 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 secret.
``(f) Civil Proceedings To Enjoin Violations.--
``(1) Generally.--The Attorney General may, in a civil
action, obtain appropriate injunctive relief against any
violation of this section.
``(2) Exclusive Jurisdiction.--The district courts of the
United States shall have exclusive original jurisdiction of
civil actions under this subsection.
``(g) Territorial Application.--
``(1) This section applies to conduct occurring within the
United States.
``(2) This section also applies to conduct occurring
outside the United States if--
``(A) the offender is--
``(i) a United States citizen or permanent resident alien;
or
``(ii) an organization substantially owned or controlled by
United States citizens or permanent resident aliens, or
incorporated in the United States; or
``(B) an act in furtherance of the offense was committed in
the United States.
``(h) Nonpreemption of Other Remedies.--This section 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.
``(i) Exceptions to Prohibition.--
``(1) This section does not prohibit and shall not impair
any otherwise lawful activity conducted by an agency or
instrumentality of the United States, a State, or a political
subdivision of a State.
``(2) This section does not prohibit the reporting of any
suspected criminal activity to any law enforcement agency or
instrumentality of the United States, a State, or a political
subdivision of a State, to any intelligence agency of the
United States, or to Congress.''.
(b) Clerical Amendment.--The table of sections at the
beginning of chapter 31, United States Code, is amended by
adding at the end the following new item:
``670. Protection of trade secrets.''.
SEC. 3. WIRE AND ELECTRONIC COMMUNICATIONS INTERCEPTION AND
INTERCEPTION OF ORAL COMMUNICATIONS.
Section 2516(1)(c) of title 18, United States Code, is
amended by inserting ``section 670 (relating to economic
espionage),'' after ``(bribery in sporting contests),''.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Indiana [Mr. Buyer] and the gentleman from New York [Mr. Schumer] each
will control 20 minutes.
The Chair recognizes the gentleman from Indiana [Mr. Buyer].
GENERAL LEAVE
Mr. BUYER. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to revise and extend their remarks
on the bill under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Indiana?
[[Page H10461]]
There was no objection.
Mr. BUYER. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I am pleased to speak in favor of H.R. 3723, the
Economic Espionage Act of 1996. This bill was introduced by
Representative Bill McCollum, chairman of the Subcommittee on Crime,
and cosponsored by Mr. Schumer, the ranking minority member of the
subcommittee. The bill is based, in large part, on draft legislation
forwarded to the Subcommittee on Crime from the Department of Justice
and the Federal Bureau of Investigation.
Mr. Speaker, this bill is designed to help Federal law enforcement
better combat the theft of proprietary economic information, more
commonly known as trade secrets. According to the American Society for
Industrial Security, thefts of this type of property cost American
businesses approximately $24 billion a year in losses. Generally
speaking, these types of crime fall into two broad categories: First,
there are thefts by foreign companies, often with the cooperation of
foreign governments. The FBI currently is investigating allegations of
economic espionage conducted against the United States by individuals
or organizations from 23 different countries. A number of these
countries maintain friendly relations with the United States, yet in
some cases these nations take advantage of their access to U.S.
information and their ability to collect information more easily than
our traditional adversaries. The second category of these crimes are
committed by Americans or U.S. nationals who leave their employment and
steal proprietary information which they deliver to new employers.
The Federal Government has been frustrated in its attempts to combat
this type of crime because existing laws are insufficient. There is no
Federal criminal statute which directly addresses economic espionage or
the protection of proprietary economic information. The statutes which
Federal law enforcement does use to combat this crime were drafted
decades ago, long before anyone had conceived of the kind of property
we now call ``intellectual property.'' Another obstacle to enforcing
these crimes under existing law is that there is no statutory procedure
in place to protect the victim's stolen information during criminal
proceedings. As a result, victims are often reluctant to prosecute for
fear that the prosecution itself will further disseminate the economic
information stolen from them.
H.R. 3723 will establish criminal penalties that prohibit the
wrongful copying or other acts of wrongfully controlling proprietary
economic information if done either to benefit a foreign government,
instrumentality, or agent, or disadvantage the rightful owner and to
benefit another person. The term proprietary economic information is
defined in the bill and includes financial, business, scientific, or
economic information as to which the owner has taken reasonable measure
to keep confidential and which has value, in part, by virtue of the
fact that the information is not widely known.
The bill provides for a significant enhanced penalty if the entity
committing the crime is an organization. It also provides for criminal
forfeiture of the proceeds of the crime and limited forfeiture of the
property used to commit the crime. Additionally, it requires courts
hearing cases brought under the statute to enter such orders as may be
necessary to protect the confidentiality of the information involved in
the case.
Mr. Speaker, this bill gives Federal law enforcement agencies the
tools they need to combat economic espionage. It is the product of a
bipartisan effort and was reported favorably by a unanimous voice vote
of the full Judiciary Committee. I urge all of my colleagues to support
its passage today.
{time} 1545
Mr. Speaker, I reserve the balance of my time.
Mr. HYDE. Mr. Speaker, when the cold war ended, Americans rightly
hoped that our national security would no longer be threatened. We soon
learned, however, that new or previously overlooked threats would
replace the Eastern bloc in the struggle for progress and freedom
throughout the world. We learned that evil despots in remote regions of
the world could shatter the peace and threaten world stability when it
suited their selfish interests. We also learned that ruthless
terrorists, willing and able to strike anywhere and at anytime, would
pose a growing threat to our Nation's security. But largely overlooked
as a threat to our national security is the attack being waged against
our Nation's economic interests.
In my opinion, our economic interests should be seen as an integral
part of its national security interests, because America's standing in
the world depends on its economic strength and productivity.
That's why the measure we are considering today is of great
importance. Testimony before the Judiciary Committee's Subcommittee on
Crime indicated that economic espionage crimes cost American businesses
approximately $24 billion a year in losses. But of even greater concern
than those financial losses, and they are significant in themselves, is
the fact that a large portion of these thefts are committed by agents
of foreign governments or companies. FBI Director Freeh testified that
the FBI currently is investigating allegations of economic espionage
conducted against the United States by individuals or organization from
23 different countries. Most disturbing is the fact that a number of
these countries maintain friendly relations with the United States, yet
take advantage of their access to U.S. information and their ability to
steal the innovations of American businesses.
Mr. Speaker, we simply cannot allow this type of crime to occur. The
Justice Department has told us that the existing laws dealing with the
theft of property are insufficient to combat these crimes. And no
wonder, those statutes were written in the 1930's. With all of the
technological innovation of the computer age, criminals are finding new
ways to steal the property--even the intangible property--of others.
I support this bill because it will enact a comprehensive statute to
combat this crime. It creates criminal penalties for the wrongful
copying or control of trade secrets if done to benefit a foreign
government or instrumentality. It also penalizes the wrongful diversion
of a trade secret to the economic benefit of someone other than its
owners.
Americans have long been known as the most innovative people in the
world. It is entirely appropriate that the Federal Government be
equipped with the legal tools for protecting U.S. innovations. After
all, it is our creative spirit that has made America the leader of the
business and financial world. Protecting this position requires
protecting our creative developments from unscrupulous international
competitors.
Mr. Speaker, simply put, it is in our national interest to prevent
economic espionage. This bill will help the Federal Government to
fulfill this critical mission. Enacting this measure now is of the
utmost importance.
Mr. SCHUMER. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise in support of the Economic Espionage Act.
Mr. Speaker, I introduced this legislation together with the chairman
of the Crime Subcommittee, Mr. McCollum. The Justice Department came to
both of us and identified a serious loophole in current Federal law
that applies to the protection of intellectual property.
As America moves toward a high-tech economy, some of most valuable
economic assets are intangible. They are plans, formula, inventions and
databases. Unfortunately, the Stolen Property Act, written back in the
1930's, applies to physical property and not to these trade secrets
that many companies value even more highly. No other statute has been a
satisfactory substitute either.
The Economic Espionage Act simply adds a new offense to the law
prohibiting the theft of trade secrets. The new provision will help
Federal investigators and prosecutors stop economic competitors from
pilfering this valuable information. It will also send a clear message
to foreign governments, including many of our traditional allies, that
are currently spying on America's private companies. Their agents will
now be held accountable for their criminal activity.
Two different reports have estimated conservatively that our economy
loses $2 billion a month from economic espionage. At our subcommittee
hearing in May, we heard from several businesses that had been
victimized by industrial spying. Raymond Damadian, CEO of the Fonar
Corp., estimated that his 300-person workforce would be twice as large
if not for economic espionage.
We cannot, Mr. Speaker, afford to let this loophole remain in our
law. American inventiveness is the key to our economy. From Benjamin
Franklin to Thomas Edison to Bill Gates, our national ingenuity has
been one of our greatest assets, and preserving it is our goal.
Finally, Mr. Speaker, I want to mention two concerns that have been
[[Page H10462]]
raised as this bill moved through the committee process and explain how
each has been addressed in the legislation before us today. This
explanation is for the benefit of other Members and also for
prosecutors and judges who will interpret this act later on.
First, some Members thought that this legislation might inhibit
common and acceptable business practices. For example, employees who
leave one company to work for another naturally take their general
knowledge and experience with them and no one, no one wishes to see
them penalized as a result. Similarly, reverse engineering is an
entirely legitimate practice.
Our bill was carefully drafted to avoid this problem. The very high
intent requirements and the narrow definition of a trade secret make it
clear that we are talking about extraordinary theft, not mere
competition.
Second, several Members were concerned that people acting in the
public interest as whistleblowers would be subject to the penalties in
this bill.
Again, we have carefully fine-tuned the language to avoid this
problem. There is a specific exemption for people who report
information about suspected criminal activity to government
authorities. In addition, the intent requirement for domestic economic
espionage specifies that the offender intends to confer an economic
benefit to someone other than the owner of a trade secret. If the
motivation truly is the well-being of the public, the activity is not
covered by this intent requirement. In other words, we are talking
about thieves, not whistleblowers, and the legislation makes that
clear.
I am pleased we were able to advance this better than legislation on
a bipartisan basis. I urge my colleagues to support it.
Mr. Speaker, I yield 1 minute to the gentlewoman from California [Ms.
Lofgren] who represents parts of Silicon Valley and has been an
instrumental leader on this issue.
Ms. LOFGREN. Mr. Speaker, as we look ahead to the next century, I
think all of us or many of us realize that our prosperity in America is
going to be based on knowledge and information. In my county we have
added over 50,000 jobs in 1 year's time. We have unemployment of 3.7
percent, and that is fueled by technology, it is fueled by high-skilled
jobs and information. If we do not take steps to protect knowledge and
information, as this bill does, we will face adverse economic
consequences in Silicon Valley and ultimately throughout the United
States.
So I commend the ranking member and the chairman for this bill and
urge my colleagues to support it.
Mr. SCHUMER. Mr. Speaker, I thank the gentlewoman from California
[Ms. Lofgren] for her remarks and support.
Mr. Speaker, I yield back the balance of my time.
Ms. JACKSON-LEE of Texas. Mr. Speaker, I rise in support of the
Economic Espionage Act, which passed the House Judiciary Committee by
voice vote. This bill would specifically make it a Federal crime to
steal trade secrets from American companies. Currently, the theft of
trade secrets has been prosecuted under laws such as wire fraud, mail
fraud, and the interstate transportation of stolen property.
Under this bill, if the intent of stealing a trade secret is to
benefit a foreign company or foreign government, the individual charged
with economic espionage would be subject to a maximum fine of $10
million and 25 years in prison. If foreign espionage is not involved,
the penalty would be punishable by up to $5 million and 15 years in
prison. Additionally, any property derived from the crime would be
subject to forfeiture.
This bill is long overdue. We must do everything that we can to
enable American businesses to compete on a level playing field with the
rest of the world and this bill will help us to achieve this goal.
Mr. BUYER. Mr. Speaker, I congratulate the gentleman from New York
[Mr. Schumer] on the bill, and I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Indiana [Mr. Buyer] that the House suspend the rules and
pass the bill, H.R. 3723, as amended.
The question was taken.
Mr. BUYER. Mr. Speaker, I object to the vote on the ground that a
quorum is not present and make the point of order that a quorum is not
present.
The SPEAKER pro tempore. Pursuant to clause 5, rule I, and the
Chair's prior announcement, further proceedings on this motion will be
postponed.
The point of no quorum is considered withdrawn.
____________________