Attorney General Eric Holder Speaks at the Administration Trade Secret Strategy Rollout

Department of Justice
February 20, 2013

Thank you, Victoria, for those kind words – and thank you all for being here. It’s a pleasure to welcome you to the White House today – and a privilege to stand with so many friends, key partners, and indispensable allies in introducing the Administration’s strategy for combating the theft of trade secrets.

As Victoria just mentioned, this work is a top priority for President Obama, for the entire Administration – and of course for the dedicated men and women at the Department of Justice. I’m deeply proud of the contributions that my colleagues have made in developing this strategy – and the pivotal role that the Department will play in its implementation. And I’m confident that – as we bring government agencies and additional private sector partners together to put these plans into action – we’ll continue strengthening national efforts to protect the rights, safety, and best interests of American consumers, innovators, and entrepreneurs.

Particularly in this time of ongoing economic recovery, this work is more important than ever. Despite the challenges of recent years, American companies remain the most innovative in the world. They are responsible for many of the most important technological advances the world has ever seen, an overwhelming number of the 100 most valuable brands, and almost 30 percent of global research and development spending.

This level of innovation and the investments that make it possible benefit consumers, create jobs, and support our economy. For instance, in 2011, companies in Silicon Valley added over 42,000 jobs and recorded a growth rate more than three times that of the U.S. economy as a whole. But, as any of the corporate leaders in this crowd can attest, this prosperity is a double-edged sword. And it inevitably attracts global rivals – including individuals, companies, and even countries – eager to tilt the playing field to their advantage.

By corrupting insiders, hiring hackers, and engaging in other unscrupulous and illegal activities, these entities can inflict devastating harm on individual creators, start-ups, and major companies. As one private security expert has said of the largest U.S. corporations, there are only “two categories” of companies affected by trade secret theft – “[T]hose that know they’ve been compromised and those that don’t know yet.”

This is because, as new technologies have torn down traditional barriers to international business and global commerce, they’ve also made it easier for criminals to steal trade secrets – and to do so from anywhere in the world. A hacker in China can acquire source code from a software company in Virginia without leaving his or her desk. With a few keystrokes, a terminated or simply unhappy employee of a defense contractor can misappropriate designs, processes, and formulas worth billions of dollars.

Some of these criminals exploit pilfered secrets themselves – often by extorting the victim company or starting their own enterprise. Others try to sell the illicit information to a rival company, or obtain a bounty from a country interested in encouraging such theft. And all represent a significant and steadily increasing threat to America’s economic and national security interests.

Fortunately, the women and men of the Justice Department are working tirelessly to prevent, combat, and punish these serious crimes. Thanks to the efforts of 40 prosecutors and four computer forensic experts serving in the Computer Crime and Intellectual Property Section, and more than 230 specially-trained prosecutors stationed at U.S. Attorneys’ Offices around the country, including 25 Computer Hacking and Intellectual Property – or “CHIP” – units, I’m pleased to report that we’re fighting back more aggressively, and collaboratively, than ever before. And with approximately 240 FBI agents in the field dedicated to investigating IP crime, along with officials from U.S. Immigration and Customs Enforcement, and 20 additional state, federal, and international law enforcement agencies that are partners at the IPR Center, we are poised to build on our recent successes.

I’m proud of the outstanding work that these professionals are leading every day, in offices all across the country. But I also recognize – as I know you all do – that the Justice Department won’t be able to continue making the progress we need, and that our citizens and companies deserve, on its own.

We need to increase cooperation and coordination between partners at every level of government. We need to improve engagement with the corporations represented in the room today. We need to find ways to work together more efficiently and effectively – by following the road map set forth in the Administration’s new, comprehensive strategy. And we need to do so starting immediately – because continuing technological expansion and accelerating globalization will lead to a dramatic increase in the threat posed by trade secret theft in the years ahead.

In fact, by 2015, experts believe that the number of smart phones, tablets, laptops, and other internet-access devices in use will be roughly double the total that existed in 2010. In the same period, the proliferation of cloud-based computing will significantly enhance flexibility and productivity for workers around the world. But these same forces will also create more access points and vulnerabilities that allow criminals to steal confidential information.

Just as increasing globalization will enable American companies of all sizes to benefit from foreign technical experts and research and development activities in other countries, the sharing of trade secrets with entities operating in nations with weak rule of law may expose them to intellectual property losses. Any resulting cost advantages will likely be more than offset by losses in proprietary company information.

Unfortunately, these projections aren’t merely hypothetical. We’ve seen this phenomenon before – including in the late 1990s, when I had the privilege of serving as Deputy Attorney General. Between 1997 and 2000, internet usage in the United States more than doubled – and this massive technological shift also brought about major changes in the nature of crime. For instance, in 1999 alone, we saw a 30-percent spike in intellectual property cases over the previous year. In order to fight back, in July of that year I announced the Department’s first major IP Strategy, known as the Intellectual Property Rights Initiative.

Of course, we’ve all come a long way since then. As critical technologies have advanced, criminals have adapted accordingly. Our need to keep pace with these changes remains imperative. And the stakes have never been higher.

In some industries, a single trade secret can be worth millions – or even billions – of dollars. Trade secret theft can require companies to lay off employees, to close factories, to lose sales and profits, to experience a decline in competitive position and advantage – or even to go out of business. And this type of crime can have significant impacts not only on our country’s economic well-being, but on our national security – allowing hostile states to obtain data and technology that could endanger American lives; expose our energy, financial, or other sensitive sectors to massive losses; or make our infrastructure vulnerable to attack.

In response, the Justice Department has made the investigation and prosecution of trade secret theft a top priority. This is why the National Security Division’s Counterespionage Section has taken a leading role in economic espionage cases – and others affecting national security and the export of military and strategic commodities or technology. It’s also why, in 2010, I established an internal Task Force on Intellectual Property – led by Deputy Attorney General Jim Cole and other senior Department leaders – to improve and expand our enforcement efforts in this area. And it’s why the FBI has increased its focus on trade secret theft and its use of sophisticated tools and techniques in conducting national security and criminal investigations.

Of course, most trade secret matters are dealt with in civil court. But when the Justice Department receives referrals, we investigate and, when appropriate, prosecute those matters fairly and completely. And, although the primary legislation creating criminal liability for these acts is less than 20 years old, federal law enforcement officials have established a remarkable record of success in this area.

In the decade between 2001 and 2011, we secured well over 100 convictions in cases involving criminal trade secret thefts, and 6 convictions in economic espionage cases. For instance, in December 2011, a federal court in Indiana sentenced a man from China to more than 7 years in prison – after his conviction on charges of economic espionage on behalf of a foreign university tied to the Chinese government. Last September – in New Jersey – a jury convicted another Chinese native of trade secret theft and other charges for stealing information from a defense contractor about the performance and guidance systems for missiles and other military hardware. And last November – in Michigan – a former General Motors engineer and her husband were convicted of conspiring to steal more than $40 million worth of trade secrets from GM, with intent to use them in a joint venture with an automotive competitor in China.

In these and many other cases – as we’ve refined our approach and increased our understanding of these crimes and those who commit them – the Department has also gathered valuable intelligence about foreign-based economic espionage. We’ve forged strong relationships with law enforcement partners, private sector experts, and international allies. And we’ve begun to raise awareness about the devastating impact of these crimes – and to encourage companies to report suspected breaches to law enforcement – so violators can be caught, brought to justice, and kept from striking again.

As we carry this work into the future – thanks to the support and assistance of everyone here today, and the cutting-edge strategy we’re committed to implementing – I’m confident that we’ll continue to make great strides in the fight against trade secret theft. We’ll keep improving our ability to crack down on intellectual property infringement and economic espionage. And together we’ll ensure that the United States is, and always will be, the world leader in innovation.

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Attendees of the Justice Department announcement received copies of the following report:

Related articles

• U.S. seeks to tackle trade secret theft by China, others (news.yahoo.com)
• Obama Officials Plan Response to Cyber-Theft of Trade Secrets – Bloomberg (bloomberg.com)
• U.S. seeks to tackle trade secret theft by China, others (reuters.com)

 

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