[Congressional Record Volume 158, Number 115 (Tuesday, July 31, 2012)]
[House]
[Pages H5506-H5507]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     FOREIGN AND ECONOMIC ESPIONAGE PENALTY ENHANCEMENT ACT OF 2012

  Mr. SMITH of Texas. Mr. Speaker, I move to suspend the rules and pass 
the bill (H.R. 6029) to amend title 18, United States Code, to provide 
for increased penalties for foreign and economic espionage, and for 
other purposes.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 6029

       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 ``Foreign and Economic 
     Espionage Penalty Enhancement Act of 2012''.

     SEC. 2. PROTECTING U.S. BUSINESSES FROM FOREIGN ESPIONAGE.

       (a) For Offenses Committed by Individuals.--Section 1831(a) 
     of title 18, United States Code, is amended, in the matter 
     after paragraph (5)--
       (1) by striking ``15 years'' and inserting ``20 years''; 
     and
       (2) by striking ``not more than $500,000'' and inserting 
     ``not more than $5,000,000''.
       (b) For Offenses Committed by Organizations.--Section 
     1831(b) of such title is amended by striking ``not more than 
     $10,000,000'' and inserting ``not more than the greater of 
     $10,000,000 or 3 times the value of the stolen trade secret 
     to the organization, including expenses for research and 
     design and other costs of reproducing the trade secret that 
     the organization has thereby avoided''.

     SEC. 3. REVIEW BY THE UNITED STATES SENTENCING COMMISSION.

       (a) In General.--Pursuant to its authority under section 
     994(p) of title 28, United States Code, the United States 
     Sentencing Commission shall review and, if appropriate, amend 
     the Federal sentencing guidelines and policy statements 
     applicable to persons convicted of offenses relating to the 
     transmission or attempted transmission of a stolen trade 
     secret outside of the United States or economic espionage, in 
     order to reflect the intent of Congress that penalties for 
     such offenses under the Federal sentencing guidelines and 
     policy statements appropriately, reflect the seriousness of 
     these offenses, account for the potential and actual harm 
     caused by these offenses, and provide adequate deterrence 
     against such offenses.
       (b) Requirements.--In carrying out this section, the United 
     States Sentencing Commission shall--
       (1) consider the extent to which the Federal sentencing 
     guidelines and policy statements appropriately account for 
     the simple misappropriation of a trade secret, including the 
     sufficiency of the existing enhancement for these offenses to 
     address the seriousness of this conduct;
       (2) consider whether additional enhancements in the Federal 
     sentencing guidelines and policy statements are appropriate 
     to account for--
       (A) the transmission or attempted transmission of a stolen 
     trade secret outside of the United States; and
       (B) the transmission or attempted transmission of a stolen 
     trade secret outside of the United States that is committed 
     or attempted to be committed for the benefit of a foreign 
     government, foreign instrumentality, or foreign agent;
       (3) ensure the Federal sentencing guidelines and policy 
     statements reflect the seriousness of these offenses and the 
     need to deter such conduct;
       (4) ensure reasonable consistency with other relevant 
     directives, Federal sentencing guidelines and policy 
     statements, and related Federal statutes;
       (5) make any necessary conforming changes to the Federal 
     sentencing guidelines and policy statements; and
       (6) ensure that the Federal sentencing guidelines 
     adequately meet the purposes of sentencing as set forth in 
     section 3553(a)(2) of title 18, United States Code.
       (c) Consultation.--In carrying out the review required 
     under this section, the Commission shall consult with 
     individuals or groups representing law enforcement, owners of 
     trade secrets, victims of economic espionage offenses, the 
     United States Department of Justice, the United States 
     Department of Homeland Security, the United States Department 
     of State and the Office of the United States Trade 
     Representative.
       (d) Review.--Not later than 180 days after the date of 
     enactment of this Act, the Commission shall complete its 
     consideration and review under this section.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Texas (Mr. Smith) and the gentleman from Virginia (Mr. Scott) each will 
control 20 minutes.
  The Chair recognizes the gentleman from Texas.


                             General Leave

  Mr. SMITH of Texas. Mr. Speaker, I ask unanimous consent that all 
Members may have 5 legislative days within which to revise and extend 
their remarks and include extraneous materials on H.R. 6029 currently 
under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Texas?
  There was no objection.
  Mr. SMITH of Texas. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I thank Ranking Member John Conyers, IP Subcommittee 
Chairman Bob Goodlatte, IP Subcommittee Ranking Member Mel Watt, and 
the other Members of the House from both sides of the aisle who joined 
as original cosponsors of this commonsense bill.
  The Foreign and Economic Espionage Penalty Enhancement Act of 2012 
focuses on one goal: to deter and punish criminals who target U.S. 
economic and security interests on behalf of foreign interests.
  In 1975, tangible assets, such as real estate and equipment, made up 
83 percent of the market value of S&P 500 companies. Intangible assets, 
which include trade secrets, proprietary data, source code, business 
processes, and marketing plans, constituted only 17 percent of these 
companies' market value.

                              {time}  1950

  By 2009, these percentages had nearly reversed. Tangible assets 
accounted for only 19 percent of S&P 500 companies' market value while 
their intangible assets had soared to 81 percent. In a dynamic and 
globally connected information economy, the protection of intangible 
assets is vital not only to the success of individual enterprises but 
also to the future of entire industries.
  A global study released last year by McAfee, the world's largest 
security technology company, and Science Applications International 
Corporation concluded that corporate trade secrets and other sensitive 
intellectual capital are the newest ``currency'' of cybercriminals. The 
study found the motivation for such crimes in the cyber underground is 
almost always financial. In recent years, cybercriminals have shifted 
from targeting the theft of personal information, such as credit cards 
and Social Security numbers, to the theft of corporate intellectual 
capital. Corporate intellectual capital is vulnerable, of great value 
to competitors and foreign governments, and its theft is not always 
discovered by victims.
  Our intelligence community warns that foreign interests place a high 
priority on acquiring sensitive U.S. economic information and 
technologies. Targets include information and communications 
technologies, business information, military technologies, and rapidly 
growing civilian and dual-use technologies, such as those that relate 
to clean energy, health care, and pharmaceuticals.
  We know that certain actors intentionally seek out U.S. information 
and trade secrets. The most recent report from the Office of the 
National Counterintelligence Executive identified Chinese actors as 
``the world's most active and persistent perpetrators of economic 
espionage.'' The report also described Russia's intelligence services 
as responsible for ``conducting a range of activities to collect 
economic information and technology from U.S. targets.'' Of seven 
Economic Espionage Act cases resolved in fiscal year 2010, six involved 
links to China. Five companies were accused of the theft of trade 
secrets earlier this year. Four are Chinese state-owned enterprises or 
subsidiaries.
  In the U.S., the EEA serves as the primary tool the Federal 
Government

[[Page H5507]]

uses to protect secret, valuable commercial information from theft. The 
EEA addresses two types of trade secret theft. Section 1831 punishes 
the theft of a trade secret to benefit a foreign entity. Section 1832 
punishes the commercial theft of trade secrets carried out for economic 
advantage whether or not the theft benefits a foreign entity.
  Since enacting the EEA in 1996, Congress has not adjusted its 
penalties to take into account the increasing importance of 
intellectual property to the economic and national security of the U.S. 
The bill increases the maximum penalties for an individual convicted of 
committing espionage on behalf of a foreign entity. Currently, the 
maximum penalty for someone convicted under section 1831 of the EEA is 
15 years imprisonment and a fine of up to $500,000. This bill increases 
the maximum penalty to 20 years imprisonment and a fine of up to $5 
million. Earlier this year, the FBI estimated that U.S. companies had 
lost $13 billion to trade secret theft in just over 6 months. Over the 
past 6 years, losses to individual U.S. companies have ranged from $20 
million to as much as $1 billion.
  Our intelligence community has recognized a ``significant and growing 
threat to our Nation's prosperity and security'' posed by criminals, 
both inside and outside our borders, who commit espionage. Congress 
should also recognize this increasing threat and enhance deterrence and 
more aggressively punish those criminals who knowingly target U.S. 
companies for espionage.
  So I urge my colleagues to support H.R. 6029, which was unanimously 
reported by the Judiciary Committee this month.
  I reserve the balance of my time.
  Mr. SCOTT of Virginia. Mr. Speaker, I yield myself such time as I may 
consume.
  I rise in support of H.R. 6029, the Foreign and Economic Espionage 
Penalty Enhancement Act of 2012.
  This legislation will help to protect the intellectual property and 
competitive strengths of American businesses by increasing the maximum 
penalties for engaging in the Federal offense of economic espionage. 
This crime, which has serious repercussions for the victim companies 
and our economy, consists of knowingly misappropriating trade secrets 
with the intent or knowledge that the offense will benefit a foreign 
government.
  As reported by the U.S. Intellectual Property Enforcement 
Coordinator, economic espionage is a serious threat to American 
businesses by foreign governments. Economic espionage inflicts a 
significant cost on victim companies and threatens the economic 
security of the United States. These companies incur extensive costs 
resulting from the loss of unique intellectual property, the loss of 
expenditures related to research and development, and the loss of 
future revenues and profits. Many companies do not even know when their 
sensitive data has been stolen, and those that do find out are often 
reluctant to report the losses, fearing potential damage to their 
reputations with investors, customers, and employees.
  Unfortunately, the pace of the economic espionage collection of 
information and industrial espionage activities against major United 
States corporations is accelerating. During fiscal year 2011, the 
Department of Justice and the FBI saw an increase of 29 percent in 
economic espionage and trade secret theft investigations compared to 
the prior year. Foreign competitors of United States corporations with 
ties to companies owned by foreign governments are increasing their 
efforts to steal trade secret information and intellectual property by 
infiltrating our computer networks.
  Evidence suggests that economic espionage and trade secret theft on 
behalf of companies located in China is an emerging trend. For example, 
at least 34 companies were reportedly victimized by attacks originating 
from China in 2010. Over the course of these attacks, computer viruses 
were spread via emails to corporate employees, allowing the attackers 
to have access to emails and sensitive documents. In response to these 
growing threats, the United States Intellectual Property Coordinator, 
in her 2011 annual report, called upon Congress to increase the 
penalties for economic espionage, and this bill is consistent with that 
recommendation.

  I want to commend Members on both sides of the aisle for their work 
on this bill, particularly the gentleman from Texas, the Judiciary 
Committee chairman, Mr. Smith; the gentleman from Michigan, the ranking 
member of the committee, Mr. Conyers; my colleague from Virginia (Mr. 
Goodlatte); and the gentleman from North Carolina (Mr. Watt).
  I urge my colleagues to support the bill, and I yield back the 
balance of my time.
  Mr. SMITH of Texas. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Texas (Mr. Smith) that the House suspend the rules and 
pass the bill, H.R. 6029.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds 
being in the affirmative, the ayes have it.
  Mr. SCOTT of Virginia. 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 8 of rule XX, further 
proceedings on this question will be postponed.
  The point of no quorum is considered withdrawn.

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