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December 2, 2015

Psst! Can You Keep A Secret?

At this very moment, someone somewhere is stealing sensitive trade secrets from an unassuming American business to help a foreign government or to benefit a competitor. That might sound like something out of the opening scene in a James Bond movie or a Tom Clancy spy thriller, but acts of economic and industrial espionage against U.S. companies are very real, very serious and on a sharp rise. As long as American industry remains the world leader in innovation and ingenuity, U.S. companies will continue to be prime targets of those seeking to steal corporate secrets. The theft of trade secrets — financial, technical, scientific, economic and other valuable information — by competitors and foreign government-backed agents not only costs American businesses tens to hundreds of billions of dollars in lost profits annually, it also poses a significant and persistent threat to U.S. national security.

Theft of trade secrets, commonly known as “industrial espionage,” occurs when someone knowingly steals or misappropriates a trade secret to the economic benefit of anyone other than the owner. Industrial espionage is largely a business-on-business crime involving the theft of secret business information for commercial reasons. Secret recipes, manufacturing plant blueprints, software source codes, marketing strategies and customer lists all qualify as company trade secrets. “Economic espionage,” conversely, occurs when a trade secret is stolen for the benefit of a foreign government or instrumentality. An example of this is a foreign government-paid spy who gets a job at U.S. company to steal trade, technology or defense information in order to help his country’s own industrial sectors gain a competitive advantage or to close a national policy gap (e.g., trade, political, military). Both industrial and foreign economic espionage are covered by the Economic Espionage Act of 1996 (EEA), and each crime carries severe penalties for individuals and companies who are nabbed stealing trade secrets, including hefty fines and significant jail time. Courts may also order forfeiture of any property or proceeds derived from stolen or misappropriated trade secrets, as well as any property used or intended to be used to commit or facilitate such theft or misappropriation. As of now, the EEA is solely a criminal statute. However, bills have been introduced in both the U.S. Senate and the House of Representatives to broaden the reach of the EEA (and even state trade secret laws) to keep pace with rapid advances in today’s Cyber Age and marketplace globalization, as well as to allow a federal private right of action to be brought against trade secret thieves.

While large U.S. corporations are often cited as leading targets of industrial and economic espionage, even small companies can be victims. In truth, no industry is immune. Companies in the firearms industry are just as vulnerable as companies in the computer software, biotech, defense and other technology-driven industries. If a company has a proprietary product, process or some other thing of value that is vulnerable, more likely than not it will be targeted by prying eyes. Espionage is hardly a new phenomenon. Great civilizations dating back to the days of Sun-Tzu and the Trojan War all used spies, secret agents and intelligence gatherers to defeat their enemies or to smoke-out disloyal subjects. One of the most famous historical accounts of espionage ended with the assassination of Roman Dictator Julius Caesar on March 15, 44 B.C. Once infamous for dressing in clever disguises and using trick inks, today’s spies hide in plain sight and can just as easily steal company and government secrets by surfing the Internet, eliciting disgruntled employees, digging through trash cans, or attending tradeshows, conventions and seminars. Indeed, according to the FBI, agents of espionage have become more brazen and more varied in their tradecraft.

Recognizing the prolific threat that trade secret and economic espionage has on American industry, the FBI has made it a top priority to hunt down perpetrators of these crimes using the same tools they employ to combat terrorists. To punctuate the dangers that U.S. companies face, as well as the threat to the U.S. economy, the FBI, in collaboration with other federal government agencies, is currently engaged in a nationwide campaign to educate industry leaders about espionage and is actively seeking alliances with private sector partners to fight back.

This past year, the FBI released a short movie called The Company Man: Protecting America’s Secrets. It is meant to warn every industry and every business to be vigilant and report acts of espionage and other suspicious behavior to their local Bureau field office. The Bureau also makes numerous resources available on its website devoted to raising awareness about espionage and counterintelligence and ways businesses can protect themselves and their trade secrets.

FBI “Best Practices” To Safeguard Company Trade Secrets

Insider Threats Cyber Threats Joint Venture/Joint Research
  • Educate and regularly train  employees on security  or other protocols
  • Routinely monitor computer networks for suspicious activities
  • Ensure appropriate screening processes to select new employees
  • Educate employees not to open email with links or attachments from unfamiliar sources
  • Do not store IP vital to your company on devices that connect to the Internet
  • Establish protocols for quarantining suspicious email
  • Share the minimum amount of information appropriate to the scope of the joint venture
  • Refuse to accept unnecessary foreign representatives
  • Provide foreign representatives with stand-alone computers
Exhibitions, Conventions & Seminars Foreign Visitors Foreign Travel
  • Take mock displays instead of real equipment, when possible
  • Carefully consider whether equipment or software can be adequately protected
  • Brief all employees about threat issues surrounding foreign visitors
  • Ensure the number of escorts per visitor is adequate
  • Check backgrounds and references
  • Sanitize laptops, cell phones, and other devices
  • If feasible, use “clean” laptops, phones and new email accounts while traveling
  • Do not use non-company computers to log into your company’s networks

Source: Economic Espionage/IP Protection Presentation, October 28, 2015, Counterintelligence Strategic Partnership Program, Federal Bureau of Investigation – Boston.

For companies whose trade secrets are their lifeblood, the stakes are too high for them not to have a trade secrets protection program. An effective trade secret protection program combines all of the following critical elements:

  • Trade secrets identification processes
  • Physical and network security
  • Employee training and monitoring, including exit interviews with departing employees
  • Routine program audits
  • Agreements and other confidentiality controls with company vendors and visitors
  • Records management and destruction policies

Gone are the days when companies could protect their trade secrets simply by locking a file cabinet or changing a computer password. Companies today must be equipped with an arsenal of security barriers and firewalls and be on constant alert if they are going to successfully defend against acts of espionage and safeguard the competitive information on which their businesses depend.


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