Congressional Record, Volume 142 Issue 129 (Wednesday, September 18, 1996)

[Congressional Record Volume 142, Number 129 (Wednesday, September 18, 1996)]
[Senate]
[Pages S10882-S10886]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

ECONOMIC ESPIONAGE ACT

Mr. STEVENS. Mr. President, I ask unanimous consent that the Senate
proceed to the immediate consideration of H.R. 3723, which is now at
the desk.
The PRESIDING OFFICER. The clerk will report the bill.
The assistant legislative clerk read as follows:

A bill (H.R. 3723) to amend Title 18 U.S. Code to protect
proprietary economic information, and for other purposes.

The PRESIDING OFFICER. Is there objection to the immediate
consideration of the bill?
There being no objection, the Senate proceeded to consider the bill.

Amendment No. 5384

(Purpose: To propose a substitute)

Mr. STEVENS. Mr. President, I send a substitute amendment to the desk
and ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from Alaska [Mr. Stevens] for Mr. Specter, for
himself and Mr. Kohl, proposes an amendment numbered 5384.

Mr. STEVENS. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The text of the amendment is printed in today's Record under
``Amendments Submitted.'')

Amendment No. 5385 to Amendment No. 5384

(Purpose: To amend title 18, United States Code, to
prohibit certain activities relating to the use of computers,
and for other purposes)

Mr. STEVENS. Mr. President, I send an amendment to the desk and ask
for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from Alaska [Mr. Stevens], for Mr. Grassley,
for himself and Mr. Kyl, proposes an amendment numbered 5385
to Amendment No. 5384.

Mr. STEVENS. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.

[[Page S10883]]

The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
At the appropriate place, add the following new section:
Sec. 6.
(a) Wire and Computer Fraud.--Section 1343 of title 18,
United States Code, is amended----
(1) by adding at the end the following new subsection:
``(b) Secret Service Jurisdiction.--``The Secretary of the
Treasury and the Attorney General are authorized to enter
into an agreement under which the United States Secret
Service may investigate certain offenses under this
section.''
(a) Use of Certain Technology to Facilitate Criminal
Conduct.----
(1) Information.--The Administrative Office of the United
States Courts shall establish policies and procedures for the
inclusion in all Presentence Reports of information that
specifically identifies and describes any use of encryption
or scrambling technology that would be relevant to an
enhancement under Section 3C1.1 (dealing with Obstructing or
Impeding the Administration of Justice) of the Sentencing
Guidelines or to offense conduct under the Sentencing
Guidelines.
(2) Compiling and report.--The United States Sentencing
Commission shall----
(A) compile and analyze any information contained in
documentation described in paragraph (1) relating to the use
of encryption or scrambling technology to facilitate or
conceal criminal conduct; and
(B) based on the information compiled and analyzed under
subparagraph (A), annually report to the Congress on the
nature and extent of the use of encryption or scrambling
technology to facilitate or conceal criminal conduct.''
(c) Section 1029 of Title 18, United States Code is amended
by--``Striking the (a)(5) in the second place it appears and
replacing it with (a)(8); by striking the (a)(6) the second
place it appears and replacing it with (a)(9); and by adding
the following new section:
``(a)(10) knowingly and with intent to defraud uses,
produces, traffics in, or possesses any device containing
electronically stored monetary value.''

Mr. GRASSLEY. Mr. President, I'm pleased that the Senate has passed
the eonomic espionage bill. This is an important measure that I believe
will save American business significant amounts of money. The theft of
confidential information from American businesses is a serious problem,
and this bill takes important steps in the right direction.
I am particularly pleased that the Senate has accepted the amendment
I offered with Senator Kyl. This amendment commissions the first-ever
study on the criminal misuse of encryption technologies. Under the
Grassley-Kyl amendment, court officers who prepare pre-sentencing
reports will include information on the use of encryption to conceal
criminal conduct, obstruct investigations, and commit crimes. The
sentencing commission will then collect and collate this information
and include it in its annual report to congress.
In this way, I am hopeful that Congress and executive branch will
have reliable data on whether the criminal misuse of encryption is
actually a problem and, if so, what response to this problem would be
appropriate.
As chairman of the Oversight Subcommittee on the Judiciary Committee,
I did an informal survey of state-level law enforcement concerning the
criminal misuse of encryption. This informal survey, while not
scientific, provides valuable insights into the actions of the criminal
element in our society.
Here are just some of the responses my subcommittee received.
In one case involving John Lucich of the New Jersey attorney
general's office was involved, a computer was seized pursuant to a
warrant in a serious assault case. Examination revealed that
approximately 20 percent of the hard drive files were encrypted.
Investigators sought the assistance of two different Federal agencies.
Both of these agencies were unsuccessful in decrypting the files.
Finally, a third Federal agency was successful in decrypting the files
after expending considerable resources. The Decrypted files did not
contain evidence of the assault but rather contained evidence of child
pornography. The encryption type likely used was ``DES.''

And Officer Tim O'Neill of the Roseville, California Police
Department reported to the subcommittee that he participated in a
search involving a complaint against a subject who was on probation for
solicitation/annoyance of minors. The subject had a hidden encrypted
file on his personal computer. In the ``slack'' area at the end of the
file the officer found names, addresses, school, grade, and phone
numbers of 4-5 young teen girls. The encryption type used was known as
``pincrypt.''
Officer Mike Menz of the same department advised the subcommittee
that he was working on a joint State/Federal major check fraud case
where part of the potential evidence was encrypted.
Ivan Ortman, a senior prosecutor in Seattle, Washington, encountered
some encrypted files and password protection in a cellular phone fraud
investigation. For a number of files the popular and inexpensive
``PGP'' type of encryption was used. Orton indicated that no effort was
even made to examine the files as the police could not locate any
method for ``cracking that encryption.''
In other words, why try since such an effort is certain to be futile.
Surely a rational society should look long and hard at this situation.
Agent Chuck Davis of the Colorado Bureau of Investigation reported to
the subcommittee that he has encountered encryption as well as password
protection problems. In one embezzlement case, a computer system has
seized. Examination revealed that files on the hard disk were
encrypted. The software manufacturers were contacted and the technical
personnel who wrote the program advised that, ``they had left no `back
door' access to the product as this would adversely impact sales. The
hallmark of the program's appeal is that it cannot be broken, even by
those who created it.'' Agent Davis advised that his investigation was
``halted'' due to the time and expense of a ``brute force attack''. The
encryption program used was entitled ``watchdog.''
Agent Davis also advised the subcommittee that password protection
also presents problems for other types of investigators. In cases
involving theft of drugs from an emergency room by a doctor, bribery/
extortion by a police officer, and the suicide by an 11 year-old boy
after telling friends that he had been molested by a family friend,
investigators encountered password protection. The first two cases were
successfully resolved through assistance from the manufacturer of the
software.
The third case, however, especially illustrates the seriousness of
decryption problems--determining the unique key or in this case,
password from a large number of possibilities. According to Agent
Davis, a mere 4 character password has 1.9 million possibilities due to
the number of keyboard characters. Can you imagine how difficult it
must be to figure a short, 4 character password. What if the password
were 10 characters or 20 or more? It's easy to see why criminals are
moving toward password protection for their records.
Mr. President, I don't know what the Grassley-Kyl amendment's study
will show. But at least anecdotally, there seems to be a serious and
growing problem with criminals using encryption to commit crimes or
conceal criminal conduct. I hope we can figure out what to do about the
problem in a fair and balanced way. I yield the floor.
Mr. KYL. Mr. President, I rise to comment on the economic espionage
bill introduced by Senators specter and Kohl. I was pleased that the
Senate Judiciary Committee passed this bill, which will strengthen
current public law on crimes against our industries. It will protect
our businesses by punishing those who steal vital proprietary
information for the benefit of a foreign government or a corporation.
Economic espionage is not a new crime. The success of many U.S. firms
has made them a large target for the theft of trade secrets. It is much
easier for a foreign firm to steal American trade secrets, with little
or no penalty, than it is for a firm to spend a large amount of capital
on research and development. Economic espionage may be the future of
intelligence.
Only recently have American firms begun to recognize the economic
impact espionage has on U.S. firms. In 1992, a survey by the American
society for Industrial Security discovered that American firms lost
roughly $597 million in product development and specification data and
$110 million in manufacturing process information, due to espionage.
These losses are likely to continue. I am pleased that the Chairman and
ranking member have produced a bill that will for the first time

[[Page S10884]]

penalize those who try to steal ideas that Americans have worked hard
to develop.
One problem not yet adequately addressed is how to collect necessary
intelligence in an age when encryption protects computer communication.
In order to maintain our national security interests, I support some
measure of constitutional authority to collect intelligence even in
situations where communications have been encrypted. To that end, Mr.
President, I am hopeful that my colleagues will adopt an amendment to
this bill that Senator grassley and I have sponsored. It will amend the
federal sentencing guidelines to require that the Federal Sentencing
Commission collect, compile, and report annually on information
collected from pretrial sentence reports and other relevant documents
indicating the use of encryption to further or conceal criminal
conduct.
Whatever one's view of export policy, it is clear that law
enforcement must have better records of criminals who use encryption
technology. This amendment will accomplish that.
Mr. President, passing an economic espionage law will deter criminals
from stealing trade secrets from American businesses. I urge my
colleagues to adopt our amendment and pass the bill.
The PRESIDING OFFICER. The question is on agreeing to the amendment.
The amendment (No. 5385) was agreed to.
Mr. GRASSLEY. I am pleased that the amendment I offered with my good
friend Senator Kyl has been accepted. This amendment requires the
Sentencing Commission to report to Congress every year on the criminal
misuse of encryption technologies, including to obstruct or impede the
administration of justice. I think that this will help Congress obtain
reliable data on the question of whether encryption is actually being
used by criminals to commit crimes.
The Grassley-Kyl amendment also provides the Attorney General and
Secretary of the Treasury with the authority to enter into an agreement
providing the United States Secret Service with concurrent jurisdiction
to investigate certain types of wire fraud offenses. I considered
amending 18 U.S.C. 1343 to specifically encompass computer frauds, but
after reviewing the case law (see, E.G., U.S. v. Riggs, 967 F.2d 561
(11th Cir. 1992)) and consulting with the Justice Department, I have
decided that this is not necessary. My hope is that Federal law
enforcement and the Justice Department will make more use of section
1343 to prosecute computer crimes. Specifically, I would like this
interpretation to be committed to writing and distributed to Federal
prosecutors in the field.
Mr. LEAHY. I concur in the view of the Senator from Iowa that
amending section 1343 as he originally considered is not necessary.
Section 1343 already encompasses frauds effected by the interstate or
foreign transmission of wire communications involving, among other
things, writings, signs, or signals and, consequently, would encompass
frauds effected by means of computers in interstate or foreign
commerce. I know the Justice Department already interprets 1343 in this
way. I too would urge the Justice Department to ensure that Federal
prosecutors in the field are familiar with the scope of criminal
conduct, including fraud effected by means of computers, encompassed by
the wire fraud statute.
Regarding the new requirement that the Sentencing Commission report
on the criminal misuse of encryption technologies. I caution that the
results of this report--whatever they may be--will be necessarily
incomplete and should not be viewed out of context. Instances in which
encryption technologies have been used to thwart the theft of valuable
computerized data, which has been encrypted, and to prevent crimes,
such as economic espionage, do not usually draw the attention of law
enforcement and therefore will not be included in the report.
Mr. GRASSLEY. I wonder whether the chairman and ranking member of the
Technology Subcommittee agree with this analysis of section 1343.
Mr. SPECTER. I have listened to your exchange with Senator Leahy and
I fully agree that section 1343 already encompasses computer fraud and
that amending it is not necessary.
Mr. KOHL. I too listened to your exchange with Senator Leahy, and I
am also of the view that section 1343 covers some computer crimes and
that no amendment was necessary.

Amendment No. 5386

(Purpose: To improve the treatment and security of certain persons
found not guilty by reason of insanity in the District of Columbia, and
for other purposes)

Mr. STEVENS. Mr. President, I send an amendment to the desk and ask
for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:

The Senator from Alaska [Mr. Stevens], for Mr. Hatch,
proposes an amendment numbered 5386.

Mr. STEVENS. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
At the appropriate place in the bill, add the following:

SEC. . TRANSFER OF PERSONS FOUND NOT GUILTY BY REASON OF
INSANITY.

(a) Amendment of Section 4243 of Title 18.--Section 4243 of
title 18, United States Code, is amended by adding at the end
the following new subsection:
``(i) Certain Persons Found Not Guilty by Reason of
Insanity in the District of Columbia.--
``(1) Transfer to custody of the attorney general.--
Notwithstanding section 301(h) of title 24 of the District of
Columbia Code, and notwithstanding subsection 4247(j) of this
title, all persons who have been committed to a hospital for
the mentally ill pursuant to section 301(d)(1) of title 24 of
the District of Columbia Code, and for whom the United States
has continuing financial responsibility, may be transferred
to the custody of the Attorney General, who shall hospitalize
the person for treatment in a suitable facility.
``(2) Application.--
``(A) In general.--The Attorney General may establish
custody over such persons by filing an application in the
United States District Court for the District of Columbia,
demonstrating that the person to be transferred is a person
described in this subsection.
``(B) Notice.--The Attorney General shall, by any means
reasonably designed to do so, provide written notice of the
proposed transfer of custody to such person or such person's
guardian, legal representative, or other lawful agent. The
person to be transferred shall be afforded an opportunity,
not to exceed 15 days, to respond to the proposed transfer of
custody, and may, at the court's discretion, be afforded a
hearing on the proposed transfer of custody. Such hearing, if
granted, shall be limited to a determination of whether the
constitutional rights of such person would be violated by the
proposed transfer of custody.
``(C) Order.--Upon application of the Attorney General, the
court shall order the person transferred to the custody of
the Attorney General, unless, pursuant to a hearing under
this paragraph, the court finds that the proposed transfer
would violate a right of such person under the United States
Constitution.
``(D) Effect.--Nothing in this paragraph shall be construed
to--
``(i) create in any person a liberty interest in being
granted a hearing or notice on any matter;
``(ii) create in favor of any person a cause of action
against the United States or any officer or employee of the
United States; or
``(iii) limit in any manner or degree the ability of the
Attorney General to move, transfer, or otherwise manage any
person committed to the custody of the Attorney General.
``(3) Construction with other sections.--Subsections (f)
and (g) and section 4247 shall apply to any person
transferred to the custody of the Attorney General pursuant
to this subsection.''.
(b) Transfer of Records.--Notwithstanding any provision of
the District of Columbia Code or any other provision of law,
the District of Columbia and St. Elizabeth's Hospital--
(1) not later than 30 days after the date of enactment of
this Act, shall provide to the Attorney General copies of all
records in the custody or control of the District or the
Hospital on such date of enactment pertaining to persons
described in section 4243(i) of title 18, United States Code
(as added by subsection (a));
(2) not later than 30 days after the creation of any
records by employees, agents, or contractors of the District
of Columbia or of St. Elizabeth's Hospital pertaining to
persons described in section 4243(i) of title 18, United
States Code, provide to the Attorney General copies of all
such records created after the date of enactment of this Act;
(3) shall not prevent or impede any employee, agent, or
contractor of the District of Columbia or of St. Elizabeth's
Hospital who has obtained knowledge of the persons described
in section 4243(i) of title 18, United States Code, in the
employee's professional capacity from providing that
knowledge to the Attorney General, nor shall civil or
criminal liability attach to such employees, agents, or
contractors who provide such knowledge; and

[[Page S10885]]

(4) shall not prevent or impede interviews of persons
described in section 4243(i) of title 18, United States Code,
by representatives of the Attorney General, if such persons
voluntarily consent to such interviews.
(c) Clarification of Effect on Certain Testimonial
Privileges.--The amendments made by this section shall not be
construed to affect in any manner any doctor-patient or
psychotherapist-patient testimonial privilege that may be
otherwise applicable to persons found not guilty by reason of
insanity and affected by this section.
(d) Severability.--If any provision of this section, an
amendment made by this section, or the application of such
provision or amendment to any person or circumstance is held
to be unconstitutional, the remainder of this section and the
amendments made by this section shall not be affected
thereby.
The PRESIDING OFFICER. The question is on agreeing to the amendment.
The amendment (No. 5386) was agreed to.

Amendment No. 5387 to Amendment No. 5384

(Purpose: To provide funding for the establishment of Boys and Girls
Clubs in public housing projects and other distressed areas, and for
other purposes)

Mr. STEVENS. Mr. President, I send an amendment to the desk and ask
for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:

The Senator from Alaska [Mr. Stevens], for Mr. Hatch, for
himself, and Mr. Kohl, proposes an amendment numbered 5387 to
amendment No. 5384.

SEC. . ESTABLISHING BOYS AND GIRLS CLUBS.

(a) Findings and Purpose.--
(1) Findings.--The Congress finds that--
(A) the Boys and Girls Clubs of America, chartered by an
Act of Congress on December 10, 1991, during its 90-year
history as a national organization, has proven itself as a
positive force in the communities it serves;
(B) there are 1,810 Boys and Girls Clubs facilities
throughout the United States, Puerto Rico, and the United
States Virgin Islands, serving 2,420,000 youths nationwide;
(C) 71 percent of the young people who benefit from Boys
and Girls Clubs programs live in our inner cities and urban
areas;
(D) Boys and Girls Clubs are locally run and have been
exceptionally successful in balancing public funds with
private sector donations and maximizing community
involvement;
(E) Boys and Girls Clubs are located in 289 public housing
sites across the Nation;
(F) public housing projects in which there is an active
Boys and Girls Club have experienced a 25 percent reduction
in the presence of crack cocaine, a 22 percent reduction in
overall drug activity, and a 13 percent reduction in juvenile
crime;
(G) these results have been achieved in the face of
national trends in which overall drug use by youth has
increased 105 percent since 1992 and 10.9 percent of the
Nation's young people use drugs on a monthly basis; and
(H) many public housing projects and other distressed areas
are still underserved by Boys and Girls Clubs.
(2) Purpose.--It is the purpose of this section to provide
adequate resources in the form of seed money for the Boys and
Girls Clubs of America to establish 1,000 additional local
Boys and Girls Clubs in public housing projects and other
distressed areas by 2001.
(b) Definitions.--For purposes of this section--
(1) the terms ``public housing'' and ``project'' have the
same meanings as in section 3(b) of the United States Housing
Act of 1937; and
(2) the term ``distressed area'' means an urban, suburban,
or rural area with the high percentage of high risk youth as
defined in section 509A of the Public Health Service Act (42
U.S.C. 290aa-8(f)).
(c) Establishment.--
(1) In general.--For each of the fiscal years 1997, 1998,
1999, 2000, and 2001, the Director of the Bureau of Justice
Assistance of the Department of Justice shall provide a grant
to the Boys and Girls Clubs of America for the purpose of
establishing Boys and Girls Clubs in public housing projects
and other distressed areas.
(2) Contracting authority.--Where appropriate, the
Secretary of Housing and Urban Development, in consultation
with the Attorney General, shall enter into contracts with
the Boys and Girls Clubs of America to establish clubs
pursuant to the grants under paragraph (1).
(d) Report.--Not later than May 1 of each fiscal year for
which amounts are made available to carry out this Act, the
Attorney General shall submit to the Committees on the
Judiciary of the Senate and the House of Representatives a
report that details the progress made under this Act in
establishing Boys and Girls Clubs in public housing projects
and other distressed areas, and the effectiveness of the
programs in reducing drug abuse and juvenile crime.
(e) Authorization of Appropriations.--
(1) In general.--There are authorized to be appropriated to
carry out this section--
(A) $20,000,000 for fiscal year 1997;
(B) $20,000,000 for fiscal year 1998;
(C) $20,000,000 for fiscal year 1999;
(D) $20,000,000 for fiscal year 2000; and
(E) $20,000,000 for fiscal year 2001;
(2) Violent crime reduction trust fund.--The sums
authorized to be appropriated by this subsection may be made
from the Violent Crime Reduction Trust Fund.

The PRESIDING OFFICER. The question is on agreeing to the amendment.
The amendment (No. 5387) was agreed to.
Mr. STEVENS. Mr. President, I ask unanimous consent that the
substitute, as amended, be agreed to, the bill be deemed read the third
time, and passed, the motion to reconsider be laid upon the table, and
that any statements relating to the bill appear at this point in the
Record.
The PRESIDING OFFICER. Without objection, it is so ordered.
The committee substitute amendment was agreed to.
The bill (H.R. 3723), as amended, was passed.
Mr. KOHL. Mr. President, I am pleased that today the Senate has taken
up and passed H.R. 3723. We are sending that bill back to the House
with substitute. This language, which I drafted with Senator Specter,
is based on our companion measures, S. 1556 (``The Economic Espionage
Act'') and S.1557 (``The Economic Security Act'').
I would like to take this opportunity to point out several provisions
of our legislation and explain their purpose and meaning.
This legislation includes a provision penalizing the theft of
proprietary economic information and a second provision penalizing that
theft when it is done on behalf of or to benefit a foreign government,
instrumentality, or agent. The principle purpose of this second
(foreign government) provision is not to punish conventional commercial
theft and misappropriation of trade secrets (which is covered by the
first provision). Thus, to make out an offense under this section, the
prosecution must show in each instance that the perpetrator intended
to, or had reason to believe that his or her actions would aid a
foreign government, instrumentality, or agent. Enforcement agencies
should administer this section with its principle purpose in mind and
therefore should not apply section 572 to foreign corporations when
there is no evidence of foreign government sponsored or coordinated
intelligence activity. This particular concern is borne out in our
understanding of the definition of ``foreign instrumentality,'' which
indicates that a foreign organization must be ``substantially owned,
controlled, sponsored, commanded, managed, or dominated by a foreign
government or subdivision thereof.'' We do not mean for the test of
substantial control to be mechanistic or mathematical. The simple fact
that the majority of the stock of a company is owned by a foreign
government will not suffice under this definition, nor for that matter
will the fact that a foreign government only owns 10 percent of a
company exempt it from scrutiny. Rather the pertinent inquiry is
whether the activities of the company are, from a practical and
substantive standpoint, foreign government directed.
To make out a case under these two provisions (sections 1832 and
572), the prosecution would have to show that the accused knew or had
reason to know that a trade secret had been stolen or appropriated
without authorization. This threshold separates conduct that is
criminal from that which is innocent. Thus, for example, these sections
would not give rise to prosecution for legitimate economic collection
or reporting by personnel of foreign governments or international
financial institutions, such as the World Bank, because such legitimate
collection or reporting would not include the collection or reporting
of trade secrets that had been stolen, misappropriated or converted
without authorization.
In the section dealing with foreign government sponsored espionage,
and derived from S. 1557, the definition of proprietary economic
information is different from the definition of proprietary economic
information in section 2. In particular, the definition contained in
section 1831(2) indicates that ``general knowledge'' is not included in
the term, while the definition in section 571(4) does not. We do not
intend

[[Page S10886]]

to imply by this difference that general knowledge can or should be the
subject of a prosecution under section 572. Of course, someone can use
their general experience and skills and work for a foreign government.
They cannot, however, steal a piece of proprietary economic information
for an owner and thereby violate section 572 of this provision. Our
point is simply that when a person is working on behalf of a foreign
government, instrumentality or agency, that person has to be
particularly careful to ensure that the information being used is not
proprietary economic information.

Some people have asked whether a piece of proprietary economic
information has to be novel or inventive. Unlike patented material,
something does not have to be novel, in the patent law sense, in order
to be a piece of proprietary economic information. Of course, often it
will be because an owner will have a patented invention that he or she
has chosen to maintain the material as a piece of proprietary economic
information rather than reveal it through the patent process. Even if
the material is not novel in the patent law sense, some form of novelty
is probably inevitable since ``that which does not possess novelty is
usually known; secrecy, in the context of trade secrets implies at
least minimal novelty.'' Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470,
476 (1974). While we do not strictly impose a novelty or inventiveness
requirement in order for material to be considered proprietary economic
information, looking at the novelty or uniqueness of a piece of
information or knowledge should inform courts in determining whether
something is a matter of general knowledge, skill or experience.
Although we do not require novelty or inventiveness, the definition
of proprietary economic information includes the provision that an
owner have taken reasonable measures under the circumstances to keep
the information confidential. We do not with this definition impose any
requirements on companies or owners. Each owner must assess the value
of the material it seeks to protect, the extent of a threat of theft,
and the ease of theft in determining how extensive their protective
measures should be. We anticipate that what constitutes reasonable
measures in one particular field of knowledge or industry may vary
significantly from what is reasonable in another field or industry.
However, some common sense measures are likely to be common across the
board. For example, it is only natural that an owner would restrict
access to proprietary economic information to the people who actually
need to use the information. It is only natural also that an owner
clearly indicate in some form or another that the information is
proprietary. However, owners need not take heroic or extreme protective
measures in order for their efforts to be reasonable.
Some people have asked how this legislation might affect reverse
engineering. Reverse engineering is a broad term that encompasses a
variety of actions. The important thing is to focus on whether the
accused has committed one of the prohibited acts of this statute rather
than whether he or she has ``reverse engineered.'' If someone has
lawfully gained access to a trade secret or a piece or proprietary
economic information, and can replicate it without violating copyright,
patent or this law, then that form of ``reverse engineering'' should be
fine. For example, if a person can drink Coca-Cola and, because he
happens to have highly refined taste buds, can figure out what the
formula is, then this legislation cannot be used against him. Likewise,
if a person can look at a product and, by using their own general
skills and expertise, dissect the necessary attributes of the product,
then that person should be free from any threat of prosecution.

We have been deeply concerned about the efforts taken by courts to
protect the confidentiality of proprietary economic information. It is
important that in the early stages of a prosecution the issue whether
material is proprietary economic information not be litigated. Rather,
courts should, when entering these orders, always assume that the
material at issue is in fact proprietary economic information.
We are also concerned that victims of economic espionage receive
compensation for their losses. This legislation incorporates through
reference existing law to provide procedures to be used in the
detention, seizure, forfeiture, and ultimate disposition of property
forfeited under the section. Under these procedures, the Attorney
General is authorized to grant petitions for mitigation or remission of
forfeiture and for the restoration of forfeited property to the victims
of an offense. The Attorney General may also take any other necessary
or proper action to protect the rights of innocent people in the
interest of justice. In practice, under the forfeiture laws, victims
are afforded priority in the disposition of forfeited property since it
is the policy of the Department of Justice to provide restitution to
the victims of criminal acts whenever permitted to do so by the law.
Procedures for victims to obtain restitution may be found at Section 9
of Title 28, Code of Federal Regulations.
In addition to requesting redress from the Attorney General, any
person--including a victim--asserting an interest in property ordered
forfeited may petition for a judicial hearings to adjudicate the
validity of the alleged interest and to revise the order of forfeiture.
Additionally, forfeitures are subject to a requirement of
proportionality under the Eight Amendment; that is, the value of the
property forfeited must not be excessively disproportionate to the
crimes in question.
Finally, we have required that the Attorney General report back to us
on victim restitution two and four years after the enactment of this
legislation. We have heard from some companies that they only rarely
obtain restitution awards despite their eligibility. We wish to
carefully monitor restitution to ensure that the current system is
working well and make any changes that may be necessary.
Mr. President, we have worked closely in cooperation with the
Administration in drafting this legislation. It is a bipartisan
measure, broadly supported, and necessary for our country's future
industrial vitality.

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