[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.

                          ____________________