Calendar No. 546
104th Congress Report
SENATE
2d Session 104-359
_______________________________________________________________________
THE INDUSTRIAL ESPIONAGE ACT OF 1996
_______
August 27, 1996.--Ordered to be printed
Filed under authority of the order of the Senate of August 2, 1996
_______________________________________________________________________
Mr. Hatch, from the Committee on the Judiciary, submitted the following
R E P O R T
[To accompany S. 1556]
The Committee on the Judiciary, to which was referred the
bill (S. 1556) to amend provisions of title 18, United States
Code, with respect to the prohibition of industrial espionage,
and for other purposes, having considered the same, reports
favorably thereon, with an amendment in the nature of a
substitute, and recommends that the bill, as amended, do pass.
CONTENTS
Page
I. Purpose..........................................................4
II. Legislative history..............................................4
III. Discussion.......................................................5
IV. Section-by-section analysis.....................................13
V. Regulatory impact statement.....................................18
VI. Cost estimate...................................................18
VII. Changes in existing law.........................................19
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Industrial Espionage Act of 1996.''
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings.--Congress finds that--
(1) sustaining a healthy and competitive national economy is
imperative;
(2) the development and production of proprietary economic
information involves every aspect of interstate commerce and
business;
(3) the development, production, protection, and lawful
exchange, sale, and transfer of proprietary economic
information is essential to maintaining the health and
competitiveness of interstate commerce and the national
economy;
(4) much proprietary economic information moves in interstate
and foreign commerce and proprietary economic information that
does not move in interstate or foreign commerce directly and
substantially affects proprietary economic information that
does;
(5) the theft, wrongful destruction or alteration,
misappropriation, and wrongful conversion of proprietary
economic information substantially affects and harms interstate
commerce, costing United States firms, businesses, industries,
and consumers millions of dollars each year; and
(6) enforcement of existing State laws protecting proprietary
economic information is frustrated by the ease with which
stolen or wrongfully appropriated proprietary economic
information is transferred across State and national
boundaries.
(b) Purpose.--The purpose of this Act is--
(1) to promote the development and lawful utilization of
United States proprietary economic information produced for, or
placed in, interstate and foreign commerce by protecting it
from theft, wrongful destruction or alteration,
misappropriation, and conversion; and
(2) to secure to authors and inventors the exclusive right to
their respective writings and discoveries.
SEC. 3. PREVENTION OF ECONOMIC ESPIONAGE AND PROTECTION OF PROPRIETARY
ECONOMIC INFORMATION IN INTERSTATE AND FOREIGN
COMMERCE.
(a) In General.--Title 18, United States Code, is amended by
inserting after chapter 89 the following new chapter:
``CHAPTER 90--PROTECTION OF PROPRIETARY ECONOMIC INFORMATION
``Sec.
``1831. Definitions.
``1832. Criminal activities affecting proprietary economic
information.
``1833. Criminal forfeiture.
``1834. Import and export sanctions.
``1835. Extraterritoriality.
``1836. Construction with other laws.
``1837. Preservation of confidentiality.
``1838. Prior authorization requirement.
``1839. Law enforcement and intelligence activities.
``1831. Definitions
``As used in this chapter:
``(1) The term `person' means a natural person, corporation,
agency, association, institution, or any other legal,
commercial, or business entity.
``(2) The term `proprietary economic information' means all
forms and types of financial, business, scientific, technical,
economic, or engineering information, including data, plans,
tools, mechanisms, compounds, formulas, designs, prototypes,
processes, procedures, programs, codes, or commercial
strategies, whether tangible or intangible, and whether stored,
complied, or memorialized physically, electronically,
graphically, photographically, or in writing that--
``(A) the owner thereof has taken reasonable measures
to keep such information confidential; and
``(B) the information derives independent economic
value, actual or potential, from not being generally
known to, and not being readily ascertainable,
acquired, or developed by legal means by the public.
The term does not include any knowledge, experience, training,
or skill that a person lawfully has acquired due to his work as
an employee of or as an independent contractor for any person.
``(3) The term `owner' means the person or persons in whom,
or United States Government component, department, or agency in
which, rightful legal, beneficial, or equitable title to, or
license in, proprietary economic information is reposed.
``(4) The term `United States person' means--
``(A) in the case of a natural person, a United
States citizen or permanent resident alien; and
``(B) in the case of a nonnatural person, an entity
substantially owned or controlled by the United States
Government or by United States citizens or permanent
resident aliens, or incorporated in the United States.
``(5) The term `without authorization' means not permitted,
expressly or implicitly, by the owner.
``1832. Criminal activities affecting proprietary economic information
``(a) Any person, with intent to, or reason to believe that it
will, injure any owner of proprietary economic information having a
value of not less than $100,000 and with intent to convert it to his or
her own use or benefit or the use or benefit of another, who
knowingly--
``(1) steals, or without authorization appropriates, takes,
carries away, or conceals, or by fraud, artifice, or deception
obtains such information;
``(2) without authorization copies, duplicates, sketches,
draws, photographs, downloads, uploads, alters, destroys,
photocopies, replicates, transmits, delivers, sends, mails,
communicates, or conveys such information;
``(3) receives, buys, or possesses such information, knowing
the same to have been stolen or appropriated, obtained, or
converted without authorization;
``(4) attempts to commit any offense described in paragraphs
(1) through (3);
``(5) wrongfully solicits another to commit any offense
described in paragraphs (1) through (3); or
``(6) conspires with one or more other persons to commit any
offense described in paragraphs (1) through (3), and one or
more of such persons do any act to effect the object of the
conspiracy,
shall, except as provided in subsection (b), be fined up to $250,000,
or twice the value of the proprietary economic information, whichever
is greater, or imprisoned not more that 10 years, or both.
``(b) Any corporation that commits any offense described in
paragraphs (1) through (6) of subsection (a) shall be fined up to
$10,000,000, or twice the economic value of the proprietary economic
information, whichever is greater.
``(c) This section does not prohibit the reporting of any suspected
criminal activity or regulatory violation to any appropriate agency or
instrumentality of the United States, or a political subdivision of a
State, or to Congress.
``1833. Criminal forfeiture
``(a) Notwithstanding any provision of State law, any person
convicted of a violation under this chapter shall forfeit to the United
States--
``(1) any property constituting or derived from, any proceeds
the person obtained, directly or indirectly, as the result of
such violation; and
``(2) 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.
``(b) the court, in imposing a sentence on such person, shall
order, in addition to any other sentence imposed pursuant to this
chapter, that the person forfeit to the United States all property
described in this section.
``(c) 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 section 413 of the
Comprehensive Drug Abuse Prevention and Control Act of 1970 (21 U.S.C.
853), except for subsection 413(d) which shall not apply to forfeitures
under this section.
``(d) Notwithstanding section 524(c) of title 28, there shall be
deposited in the Crime Victims Fund established under section 1402 of
the Victims of Crime Act of 1984 (42 U.S.C. 10601) all amounts from the
forfeiture of property under this section remaining after the payment
of expenses and sale authorized by law.
``1834. Import and export sanctions
``(a) The President may, to the extent consistent with
international agreements to which the United States is a party,
prohibit, for a period of not longer than 5 years, the importation
into, or exportation from, the United States, whether by carriage of
tangible items or by transmission, any merchandise produced, made,
assembled, or manufactured by a person convicted of any offense
described in section 1832 of this title, or in the case of an
organization convicted of any offense described in such section, its
successor entity or entities.
``(b)(1) The Secretary of the Treasury may impose on any other
person who knowingly violates any order of the President issued under
the authority of this section, a civil penalty equal to not more than 5
times the value of the exports or imports involved, or $100,000,
whichever is greater.
``(2) Any merchandise imported or exported in violation of an order
of the President issued under this section shall be subject to seizure
and forfeiture in accordance with sections 602 through 619 of the
Tariff Act of 1930.
``(3) The provisions of law relating to seizure, summary and
judicial forfeiture, and condemnation of property for violation of the
United States customs laws, the disposition of such property or the
proceeds from the sale thereof, the remission or mitigation of such
forfeiture, and the compromise of claims, shall apply to seizures and
forfeitures incurred, or alleged to have been incurred under this
section to the extent that they are applicable and not inconsistent
with the provisions of this chapter.
``1835. Extraterritoriality
``(a) This chapter applies to conduct occurring within the United
States.
``(b) This chapter applies to conduct occurring outside the
territorial and special maritime jurisdiction of the United States, its
territories, and possessions if--
``(1) the offender is a United States person; or
``(2) an act in furtherance of the offence was committed in
the United States.
``1836. Construction with other laws
``This chapter shall not be construed to preempt or displace any
other Federal or State remedies, whether civil or criminal, for the
misappropriation of proprietary economic information, or to affect the
otherwise lawful disclosure of information by any government employee
under section 552 of title 5 (commonly known as the Freedom of
Information Act).
``1837. Preservation of confidentiality
``In any prosecution under this chapter, the court may enter such
orders and take such other action as may be necessary and appropriate
to preserve the confidentiality of proprietary economic information,
consistent with rule 16 of the Federal Rules of Criminal Procedure, the
Federal Rules of Evidence, and other applicable laws. An interlocutory
appeal by the United States shall lie from a decision or order of a
district court authorizing the disclosure of proprietary economic
information.
``1838. Prior authorization requirement
``The United States may not file a charge under this chapter or use
a violation of this chapter as a predicate offense under any other law
without the personal approval of the Attorney General, the Deputy
Attorney General, or the Assistant Attorney General for the Criminal
Division of the Department of Justice.
``1839. Law enforcement and intelligence activities
``This chapter does not prohibit any and shall not impair otherwise
lawful activity conducted by any agency or instrumentality of the
United States, a State, or a political subdivision of a State, or an
intelligence agency of the United States.''.
(b) Technical Amendment.--The table of chapters for title 18,
United States Code, is amended by inserting after the item relating to
chapter 89 the following new item:
``90. Protection of Proprietary Economic Information........... 1831''.
SE
SEC. 4. WIRE AND ELECTRONIC COMMUNICATIONS INTERCEPTION AND
INTERCEPTION OF ORAL COMMUNICATIONS.
Section 2516(1)(a) of title 18, United States Code, is amended by
inserting ``chapter 90 (relating to economic espionage and protection
of proprietary economic information in interstate and foreign
commerce),'' after ``title:''.
I. Purpose
The Industrial Espionage Act of 1996, S. 1556, would
provide for Federal criminal penalties for the theft,
unauthorized appropriation, or other misuse of proprietary
economic information.
II. Legislative History
The basis for the protection of proprietary economic
information is rooted in the U.S. Constitution, which
explicitly grants Congress the power ``to promote the progress
of science and useful arts, by securing for limited times to
authors and inventors the exclusive right to their respective
writings and discoveries,'' U.S. Const. art. I, sec. 8, cl. 8,
and which also gives Congress the power ``[t]o regulate
Commerce * * * among the several States.'' U.S. Const. art. I,
sec. 8, cl. 3.
The goal of this legislation is to punish the theft,
unauthorized appropriation, or unauthorized dissemination of
proprietary economic information.
This legislation was introduced by Senators Kohl and
Specter on February 1, 1996, in the 104th Congress. On February
28, 1996, the Subcommittee on Terrorism, Technology and
Government Information held a hearing jointly with the Select
Committee on Intelligence on the measure and the general issue
of the theft of proprietary economic information. The Director
of the Federal Bureau of Investigation, Louis Freeh, testified.
The Committee also heard testimony from Geoffrey Shaw, the
former CEO of Ellery Systems, Inc., of Boulder, CO, and Dr.
Raymond Damadian, president and chairman of Fonar Corporation
of Melville, NY. In addition, written statements were received
from John J. Higgins, senior vice president and general counsel
of the Hughes Electronics Corp.; Norman Augustine, president
and CEO of Lockheed Martin Corp.; and the National Information
Infrastructure Testbed. A classified briefing by the FBI
Director for members of the Judiciary and Intelligence
Committees was held on March 13, 1996. The House Committee on
the Judiciary, Subcommittee on Crime, also held hearings on
this issue on May 9, 1996.
On July 25, 1996, the Judiciary Committee met in executive
session to consider the bill. The Committee unanimously
approved the measure, with an amendment in the nature of a
substitute, proposed by Senators Kohl and Specter. Embodied in
the substitute amendment were several changes to the original
text of the bill. The first was a change in the definition of
``owner'' intended to bring the bill into full accord with the
General Agreement on Trade and Tariffs. The second was a change
in the definition of ``proprietary economic information''
designed to clarify the scope of the definition. The third was
a change in the elements of the offense designed to clarify the
exact nature of the act criminalized. The fourth was a
reduction in the possible prison term in order to align the
penalties with those available under the National Stolen
Property Act, 18 U.S.C. 2314. The fifth was an alteration in
the available fines in order to allow fines be levied in
relation to the value of the stolen information. The sixth was
an alteration in the import and export sanctions provisions in
order to clarify the procedures for their use. The seventh
narrowed the extraterritorial application of the legislation.
The eighth was the requirement of prior authorization by the
Attorney General, the Deputy Attorney General, or the Assistant
Attorney General for the Criminal Division of the Justice
Department before a prosecution under the measure can be
commenced.
III. Discussion
Congress has heretofore confined its protection of
intellectual property to patented and copyrighted material.
With this legislation, Congress extends the protection of
Federal law to the equally important area of proprietary
economic information. During the course of the Committee's
hearings, we documented that proprietary economic information
is vital to the prosperity of the American economy, that it is
increasingly the target of thieves, and that our current laws
are inadequate to punish people who steal the information.
In a world where a nation's power is now determined as much
by economic strength as by armed might, we cannot afford to
neglect to protect our intellectual property. Today, a piece of
information can be as valuable as a factory is to a business.
The theft of that information can do more harm than if an
arsonist torched that factory. But our Federal criminal laws do
not recognize this and do not punish the information thief.
This is an unacceptable oversight. The Industrial Espionage Act
is an effort to remedy the problem.
Growing Importance of Proprietary Economic Information
The United States produces the vast majority of the
intellectual property in the world. This includes patented
inventions, copyrighted material, and proprietary economic
information. Proprietary information, in contrast with
copyrighted material and patented inventions, is secret. The
value of the information is almost entirely dependent on its
being a closely held secret. It includes, but is not limited
to, information such as production processes, bid estimates,
production schedules, computer software, technology schematics,
and trade secrets. It is, in short, the very information that
drives the American economy. For many companies this
information is the keystone to their economic competitiveness.
They spend many millions of dollars developing the information,
take great pains and invest enormous resources to keep it
secret, and expect to reap rewards from their investment.
In the last few decades, intangible assets have become more
and more important to the prosperity of companies. A recent
analysis by the Brookings Institute indicates that in 1982, the
tangible assets of mining and manufacturing companies accounted
for 62 percent of their market value. By 1992, they represented
only 38 percent of the market value. Blair, ``Ownership and
Control: Rethinking Corporate Governance for the Twenty-First
Century'', 234 n.57 (1995). As this Nation moves into the high-
technology, information age, the value of these intangible
assets will only continue to grow. Ironically, the very
conditions that make this proprietary information so much more
valuable make it easily stolen. Computer technology enables
rapid and surreptitious duplications of the information.
Hundreds of pages of information can be loaded onto a small
computer diskette, placed into a coat pocket, and taken from
the legal owner.
This material is a prime target for theft precisely because
it costs so much to develop independently, because it is so
valuable, and because there are virtually no penalties for its
theft. The information is pilfered by a variety of people and
organizations for a variety of reasons. A great deal of the
theft is committed by disgruntled individuals or employees who
hope to harm their former company or line their own pockets. In
other instances, outsiders target a company and systematically
infiltrate the company then steal its vital information. More
disturbingly, there is considerable evidence that foreign
governments are using their espionage capabilities against
American companies.<SUP>1
---------------------------------------------------------------------------
\1\ S. 1556 was introduced in tandem with S. 1557, ``The Economic
Security Act of 1996.'' S. 1557, which was referred to the Select
Committee on Intelligence, specifically addresses the problem of
foreign government-sponsored theft of proprietary economic information.
S. 1557 includes enhanced penalties when the theft is sponsored by a
foreign government. On April 30, 1996, the Intelligence Committee
favorably reported a measure almost identical to S. 1557 as title V of
S. 1718, ``The Intelligence Authorization Act for Fiscal Year 1997.''
---------------------------------------------------------------------------
We use the term economic or industrial espionage advisedly.
Espionage is typically an organized effort by one country's
government to obtain the vital national security secrets of
another country. Typically, espionage has focused on military
secrets. But even as the cold war has drawn to a close, this
classic form of espionage has evolved. Economic superiority is
increasingly as important as military superiority. And the
espionage industry is being retooled with this in mind.
It is important, however, to remember that the nature and
purpose of industrial espionage are sharply different from
those of classic political or military espionage. When we use
the phrase industrial espionage, we include a variety of
behavior--from the foreign government that uses its classic
espionage apparatus to spy on a company, to the two American
companies that are attempting to uncover each other's bid
proposals, to the disgruntled former employee who walks out of
his former company with a computer diskette full of engineering
schematics. All of these forms of industrial espionage are
troubling, and they are punished as the theft of proprietary
economic information in this measure.
Increasing Incidents of Theft of Proprietary Economic Information
Director Freeh testified at the Subcommittee's February
hearing that ``[f]oreign governments * * * actively target U.S.
persons, firms, industries, and the U.S. Government itself to
steal or wrongfully obtain critical technologies, data and
information in order to provide their own industrial sectors
with a competitive advantage.'' Director Freeh reported that in
the last year, the number of cases of economic espionage that
the FBI is investigating doubled from 400 to 800. Twenty-three
countries are involved in those cases.
During 1992 hearings before the House Committee on the
Judiciary, Subcommittee on Economic and Commercial Law, the
Director of the Central Intelligence Agency, Robert Gates,
stated that:
Our fundamental assessment is that while the end of
the Cold War did not bring an end to the foreign
intelligence threat, it did change the nature of that
threat. The threat has become more diversified and more
complex. In a world that increasingly measures national
power and national security in economic terms as well
as military terms, many foreign intelligence services
around the world are shifting the emphasis in
targeting. Foreign targeting of American technology
continues; technology is important for economic as well
as military reasons. Since the U.S. continues to be on
the cutting edge of technological innovation,
technology theft will remain a major concern for us.
``The Threat of Foreign Economic Espionage to U.S.
Corporations: Hearings Before the Subcomm. on Economic and
Commercial Law of the House Comm. on the Judiciary,'' 102d
Cong., 2d sess. 59 (1977).
A report of the National Counterintelligence Center in 1995
indicated that biotechnology, aerospace, telecommunications,
computer software, transportation, advanced materials, energy
research, defense, and semiconductor companies are all top
targets for foreign economic espionage. These sectors are
``aggressively targeted'' according to the report. ``National
Counterintelligence Center, Annual Report to Congress on
Foreign Economic Collection and Industrial Espionage,'' 15
(1995). That report identified 20 different methods used to
conduct industrial espionage. The traditional methods include
recruiting an agent and then inserting the agent into the
target company, or breaking into an office to take equipment
and information. According to the report, ``computer
intrusions, telecommunications targeting and intercept and
private-sector encryption weaknesses * * * account for the
largest portion of economic and industrial information lost by
U.S. corporations.'' Id. at 16. Most American companies are
poorly prepared to deal with these sophisticated and
coordinated efforts to obtain their proprietary economic
information.
But even as American companies are attempting to deal with
foreign espionage, they also have to deal with theft by
insiders. A survey by the American Society for Industrial
Security of 325 companies in 1995 found that almost half of
them had experienced trade secret theft of some sort during the
previous two years. Heffernan and Smartwood, ``Trends in
Intellectual Property Loss Survey,'' 4 (1996). They also
reported a 323-percent increase in the number of incidents of
intellectual property loss. Id. A 1988 National Institute of
Justice study of trade secret theft in high technology
industries found that 48 percent of 150 research and
development companies surveyed had been the victims of trade
secrets theft. Mock and Rosenbaum, ``A Study of Trade Secrets
Theft in High-Technology Industries,'' National Institute of
Justice Discussion Paper 6 (1988). Almost half of the time the
target was research and development data while 38 percent of
the time the target was new technology. Id. at 16. Forty
percent of the victims found out about the theft from their
competitors. Id.
The Committee has learned of several disturbing examples of
how this theft is occurring. For example, in Arizona, an
engineer for an automobile air bag manufacturer was arrested in
1993 for selling manufacturing designs, strategies, and plans.
He asked the company's competition for more than half a million
dollars--to be paid in small bills. And he sent potential
buyers a laundry list of information they could buy. He asked
$500 for the company's capital budget plan; $1,000 for a piece
of equipment; and $6,000 for planning and product documents.
See ``Industrial Espionage By 2 Mesa Men Alleged,'' the Phoenix
Gazette, Aug. 31, 1993, at A1. The engineer subsequently
reached a plea agreement with the U.S. Government and was
sentenced to less than 6 months in prison.
Just last year, Bill Gaede, the former employee of two
major computer companies, admitted to stealing vital
information on the manufacture of microchips and selling it to
China, Cuba, and Iran. For almost a decade, he copied
manufacturing specifications worth millions of dollars. And
armed with this material, the Chinese, Cubans, and Iranians
have been able to close the gap on our technology leads. Late
last year, the FBI arrested this man and charged him under the
Federal stolen property and mail fraud laws. See ``Troubling
Issues in a Silicon Valley Spy Case,'' the New York Times, July
8, 1996, at D1. Gaede has recently reached a plea agreement
with the U.S. Government.
During its hearings, the Committee learned how an employee
of Ellery Systems in Boulder, CO, transmitted that company's
source code to another person in what appeared to be an attempt
to appropriate the source code for his own personal use. Ellery
Systems was a computer firm that supplied software technology
to various government projects, primarily in NASA astrophysics
activities. That theft of their source code, possibly at the
behest of a foreign government, ultimately destroyed the
financial viability of Ellery Systems. But all efforts to
prosecute the putative thief failed because of gaps in current
law.
Dr. Raymond Damadian, the inventor of magnetic resonance
imaging technology and founder of an MRI manufacturing company,
Fonar Corp., told the Committee that his company had been the
subject of persistent infiltration and theft. In one case, an
unauthorized service company hired former Fonar engineers to
give them the proprietary technology--the diagnostic software
and schematics--needed to service Fonar MRI machines. When
Fonar discovered the misappropriation, it sought an injunction
in Federal court. The injunction was issued, but the service
company simply violated the injunction, flouting all possible
penalties.
Director Freeh told the Committee about an FBI
investigation involving the theft of proprietary information
from two major pharmaceutical manufacturers. Two people were
offering to sell trade secrets involving two fermentation
processes covered by active patents. In February 1990, an FBI
undercover agent posed as a potential buyer and was offered the
information on one process for $1.5 million. The second process
was for sale for $6 to $8 million.
As a result of industrial espionage, American companies
have been severely damaged. The NCIC report concluded that
``[i]ndustry victims have reported the loss of hundreds of
millions of dollars, lost jobs, and lost market share.'' NCIC,
supra, at 16. The ASIS survey concluded that the potential
losses could total $63 billion. Heffernan and Smartwood, supra,
at 15.
In response to the growing problem of the theft of
proprietary economic information, the FBI has shifted the focus
of its Development of Espionage, Counterintelligence and
Counterterrorism Awareness (DECA) Program. This program has
been in place for more than 20 years. But in the last few
years, DECA has widened its efforts to address industrial
espionage. DECA coordinators in each of the FBI's 56 field
offices maintain contact with companies in their region and now
regularly brief them about methods and prevention of industrial
espionage. During the 1993 and 1994 fiscal years, the FBI
briefed almost 20,000 companies under the DECA Program.
Gaps in Current Federal Law
Developments in the law, however, have not kept pace with
this rapidly changing environment. Although Congress has
enacted patent and copyright protection laws, and computer
crime statutes, no Federal law protects proprietary economic
information from theft and misappropriation in a systematic,
principled manner. As a result, prosecutors have had trouble
shoe-horning economic espionage into these laws. Sometimes they
have succeeded, but often they have failed. See Toren, ``The
Prosecution of Trade Secrets Thefts Under Federal Law,'' 22
Pepp. L. Rev. 59, 64-94 (1994).
One provision Federal prosecutors have attempted to use is
the Depression-era National Stolen Property Act, 18 U.S.C.
2314-15. This law was designed to foil the ``roving criminal''
whose access to automobiles made movement of stolen property
across State lines so easy that State and local officials were
stymied in their pursuit. While the law works well enough for
crimes involving traditional ``goods, wares, and merchandise,''
it was drafted at a time when computers, biotechnology, and
copy machines did not even exist. Consequently, it is not
particularly well suited to deal with situations in which
intangible information alone is wrongfully duplicated and
transmitted electronically with a few keystrokes.
Moreover, recent court decisions suggest that this statute
is limited to tangible property. In Dowling v. United States,
473 U.S. 207 (1985), the Supreme Court reversed the conviction
of a man who had distributed bootlegged Elvis Presley records.
He violated copyright law, but the Court suggested that the
National Stolen Property Act only applies to tangible goods.
Id. at 216. Later appellate courts have interpreted Dowling to
preclude prosecution of the theft of ``purely intellectual
property.'' United States v. Brown, 925 F.2d 1301, 1307 (10th
Cir. 1991). We do not address whether these cases properly
understood the legislative intent of the National Stolen
Property Act, but merely point out that this caselaw makes
prosecutions for the theft of proprietary economic information
under the act difficult, making the need for this legislation
more and more urgent.
Other existing statutes used by law enforcement agencies to
combat economic espionage have similar limitations. Although
proprietary information is property under the mail and wire
fraud statutes, 18 U.S.C. 1341-43, see U.S. v. Carpenter, 484
U.S. 19, 28 (1987), prosecutors have found it difficult to use
these statutes because the theft often does not involve the use
of mail or wire. In addition, since a thief merely copies
information and does not necessarily ``defraud'' the company
permanently of the data, prosecutions are more difficult.
Under many Federal statutes, even basic concepts can prove
problematic. For example, if an individual ``downloads''
computer source code without permission of the owner, has a
theft occurred even though the true owner never lost possession
of the original and is not permanently deprived of its use?
Another difficulty with existing law is that it fails to afford
explicit protection to the confidential nature of the
information in question during enforcement proceedings. By its
nature, proprietary economic information derives value from its
exclusivity and confidentiality. If either or both are
compromised during legal proceedings, the value of the
information is diminished.
As a result of these problems, the FBI has had difficulty
conducting investigations or had prosecutions declined.
Director Freeh pointed to one case in which an association of
consultants, all of whom were long-term employees of U.S.
corporations, attempted to sell proprietary high technology to
foreign powers. The FBI sought consensual monitoring of a
subject. Its request was turned down by an Assistant U.S.
Attorney, citing Brown as holding that the consultants' actions
did not constitute criminal behavior. Director Freeh pointed to
another example in which the FBI investigated an information
broker who was engaged by two foreign companies to gather
proprietary bid information from a major U.S. company regarding
a multimillion dollar international construction project. The
information broker contacted several employees from the U.S.
company, paid them for information, and passed the information
onto the foreign companies. The broker was then paid a large
sum of money for his services. For lack of a more applicable
violation, the case was investigated as a wire fraud violation,
but a U.S. Attorney's office declined to prosecute.
Significantly, a similar investigation regarding the same
construction project and foreign companies was initiated in the
United Kingdom. This investigation resulted in prison sentences
for two other information brokers headquartered in England.
State Laws Inadequate
State laws do not fill in the gaps left by Federal law.
What State law there is protects proprietary economic
information only haphazardly. The majority of States have some
form of civil remedy for the theft of such information--either
adopting some version of the Uniform Trade Secrets Act,
acknowledging a tort for the misappropriation of the
information, or enforcing various contractual arrangements
dealing with trade secrets. These civil remedies, however,
often are insufficient. Many companies chose to forgo civil
suits because the thief is essentially judgment proof--a young
engineer who has few resources--or too difficult to pursue--a
sophisticated foreign company or government. In addition,
companies often do not have the resources or the time to bring
suit. They also frequently do not have the investigative
resources to pursue a case. Even if a company does bring suit,
the civil penalties often are absorbed by the offender as a
cost of doing business and the stolen information retained for
continued use. Only a few States have any form of criminal law
dealing with the theft of this type of information. Most such
laws are only misdemeanors, and they are rarely used by State
prosecutors.
Need for a Comprehensive Federal Law
These, and other problems, underscore the importance of
developing a systematic approach to the problem of economic
espionage. Only by adopting a national scheme to protect U.S.
proprietary economic information can we hope to maintain our
industrial and economic edge and thus safeguard our national
security. Foremost, we believe that the greatest benefit of the
Federal statute will be as a powerful deterrent. In addition, a
Federal criminal law is needed because of the international and
interstate nature of this activity, because of the
sophisticated techniques used to steal proprietary economic
information, and because of the national implications of the
theft. Moreover, a Federal criminal statute will provide a
comprehensive approach to this problem--with clear
extraterritoriality, criminal forfeiture, and import-export
sanction provisions.
S. 1556 Does Not Apply to General Knowledge and Skills
This legislation does not apply to innocent innovators or
to individuals who seek to capitalize on their lawfully
developed knowledge, skill or abilities. Employees, for
example, who change employers or start their own companies
should be able to apply their talents without fear of
prosecution because two safeguards against overreaching are
built into the law.
First, protection is provided by the definition of
``proprietary economic information'' itself. The definition
requires that an owner take objectively reasonable, proactive
measures, under the circumstances, to protect the information.
If, consequently, an owner fails to safeguard his or her
proprietary information, then no one could be rightfully
accused of misappropriating it. Most owners do take reasonable
measures to protect their proprietary economic information,
thereby placing employees and others on clear notice of the
discreet, proprietary nature of the information.
The bill explicitly states that the term proprietary
economic information does not include the general knowledge,
skills or experience that a person has. A prosecution under
this statute must establish a particular piece of information
that a person has stolen or misappropriated. It is not enough
to say that a person has accumulated experience and knowledge
during the course of his or her employ. Nor can a person be
prosecuted on the basis of an assertion that he or she was
exposed to proprietary economic information while employed. A
prosecution that attempts to tie skill and experience to a
particular piece of proprietary economic information cannot
succeed without showing that the particular material was stolen
or misappropriated. The Government cannot prosecute an
individual for taking advantage of the general knowledge and
skills or experience that he or she obtains or comes by during
his tenure with a company. Allowing such prosecutions to go
forward and allowing the risk of such charges to be brought
would unduly endanger legitimate and desirable economic
behavior.
As the Pennsylvania Supreme Court noted in Spring Steels
v. Molloy, 400 Pa. 354, 363 (1960):
It is not a phenomenal thing in American business
life to see an employee, after a long period of
service, leave his employment and start a business of
his own or in association with others. And it is
inevitable in such a situation, where the former
employee has dealt with customers on a personal basis
that some of those customers will want to continue to
deal with him in [that] new association. This is * * *
natural, logical and part of human fellowship * * *
This legislation does not criminalize or in any way hamper
these natural incidents of employment. The free and unfettered
flow of individuals from one job to another, the ability of a
person to start a new business based upon his or her experience
and expertise, should not be injured or chilled in any way by
this legislation. Individuals must have the opportunity to take
advantage of their talents and to seek and accept other
employment that enables them to profit from their abilities and
experience. And companies must have the opportunity to employ
these people. This measure attempts to safeguard an
individual's career mobility and at the same time to preserve
the proprietary economic information that underpins the
economic viability of the very company that would offer a
person a new job.
The second safeguard is provided by the bill's use of the
term ``knowingly.'' For a person to be prosecuted, the person
must know or have a firm belief that the information he or she
is taking is in fact proprietary. Under theft statutes dealing
with tangible property, normally, the thief knows that the
object he has stolen is indeed a piece of property that he has
no lawful right to convert for his personal use. The same
principle applies to this measure--for someone to be convicted
under this statute he must be aware or substantially certain
that he is misappropriating proprietary economic information
(although a defense should succeed if it is proven that he
actually believed that the information was not proprietary
after taking reasonable steps to warrant such belief). A person
who takes proprietary economic information because of
ignorance, mistake or accident cannot be prosecuted under the
act. (The bill also provides a similar safeguard by requiring
that the appropriation be without authorization.)
This requirement should not prove a great barrier to
legitimate and warranted prosecutions. Most companies go to
considerable pains to protect their proprietary economic
information. Documents are marked proprietary; security
measures put in place; and employees often sign confidentiality
agreements.
IV. Section-by-Section Analysis
Section 1. Short Title
This section sets forth the short title of the Act, which
emphasizes that the focus of the bill is on ``industrial
espionage'' and the protection of trade secrets. ``Industrial
espionage'' means activity directed at the U.S. Government or
U.S. corporations, establishments, or persons for the purpose
of unlawfully obtaining proprietary economic information. The
emphasis of this legislation is on the theft of that
proprietary economic information.
Section 2. Findings and Purpose
This section sets forth the congressional findings upon
which the Act is predicated and the remedial purposes of the
Act. The section reflects congressional determinations that the
development and production of trade secrets is integral to the
maintenance of a healthy and competitive national economy and
that, in turn, maintenance of a competitive national economy is
imperative to national security. This section also recognizes
that the Constitution grants Congress the power to protect and
enforce the exclusive rights of authors and inventors to their
writings and discoveries. One of the Act's purposes is,
therefore, to promote the development and lawful utilization of
proprietary economic information by protecting it from theft,
unauthorized misappropriation or conversion. Notwithstanding
the holding of Dowling v. United States, 473 U.S. 207 (1985),
it is intended that the provisions of the Act should apply
regardless of whether the conduct at issue could also fall
within the prohibitions of the copyright laws.
Section 3. Prevention of Industrial Espionage
This section is the core component of the Act and would add
a new Chapter ``90--Protection of Proprietary Economic
Information'' to title 18, United States Code.
Sec. 1831. Definitions
This section sets forth definitions of certain key items
used in the new chapter and builds upon the definitions already
set out in chapter 1 of title 18.
(a) ``Person'' is defined to include both individuals and
entities, such as corporations, agencies, and associations.
(b) ``Proprietary economic information'' is defined as a
type of intellectual property connoted by four characteristics:
(1) it is proprietary; (2) its nature is economic, business,
scientific, technical, or engineering; (3) it consists of
information, data, plans, tools, mechanisms, compounds,
formulas, designs, prototypes, processes, procedures, programs,
codes, or commercial strategies; and (4) it derives value from
its exclusivity. These features distinguish it from other forms
of intellectual property, such as literary or artistic works.
Both tangible and intangible forms of property and all forms of
data or information are covered, regardless of how stored or
memorialized. Additionally, the definition makes clear that the
owner of the property must have taken objectively reasonable
and proactive steps to keep the information confidential; that
is, information or data that is available generally to the
public is not included. The efforts to protect material,
however, need not be heroic merely reasonable. The term
``proprietary economic information'' also does not include
general knowledge, experience, training, or skill acquired by a
person as a result of his or her employment or hire by any
owner.
This definition is closely modeled on the definition of a
``trade secret'' used in the Uniform Trade Secrets Act. It
parallels similar definitions used by many States in their own
trade secrets legislation. Thus, it is familiar to most firms,
businesses, and individuals who commonly deal with trade
secrets and intellectual property. Congress intends to draw
upon the considerable case law and experience interpreting
``trade secrets'' to illuminate the meaning of the term
``proprietary economic information.''
(c) ``Owner'' is defined to include any person, including
the U.S. Government, having legal, beneficial, or equitable
title to, or license in, the proprietary economic information
in question.
(d) ``U.S. Person'' is defined to mean U.S. citizens or
permanent resident aliens in the case of natural persons; and,
in the case of nonnatural persons, entities substantially owned
or controlled by the U.S. Government or by U.S. citizens or
permanent resident aliens, or incorporated in the United
States.
(e) ``Without authorization'' is defined to mean without
permission of the owner. It is intended to emphasize that
innocent or negligent actors cannot be prosecuted under the
statute. See, in this regard, the additional comments regarding
section 1832 in the Discussion and below.
Sec. 1832. Criminal activities affecting proprietary economic
information
This section punishes the theft, unauthorized
appropriation, and unauthorized conversion, duplication,
alteration, or destruction of proprietary economic information.
This section is written to cover both traditional instances of
theft, where the object of the crime is removed from the
rightful owner's control and possession, as well as
nontraditional methods of misappropriation and destruction,
involving electronic duplication or alteration. With these
nontraditional methods the original property never leaves the
dominion or control of the rightful owner, but the unauthorized
duplication or misappropriation effectively destroys the value
of what is left with the rightful owner. In an electronic
environment, information can be stolen without asportation, and
the original usually remains intact. Our intent, therefore, is
to ensure that the theft of intangible information is
prohibited in the same way that theft of physical items are
protected.
This section requires that the person intends that his
actions will injure the owner of the information. This does not
require that the prosecution prove malice or evil intent. It
merely requires that the actor knew or was aware to a practical
certainty that his conduct would cause such a result. The actor
must intend to use the information for his or her personal
benefit or the benefit of another. By benefit we mean economic
benefit not abstract or reputational enhancements. This
provision means that a person who discloses proprietary
economic information but does not intend to materially gain
from it or intend the recipient to so benefit cannot be
prosecuted.
The requirement that the information have a value of not
less than $100,000 is jurisdictional and is not intended to be
an element of the crime; the prosecution need not prove that
the person knew the exact value of the information. In
determining the value of the information, the prosecution may
use the valuation technique that is appropriate in light of the
circumstances of the case. A variety of valuation methods have
been used in civil and criminal cases involving trade secrets.
See generally Rosenhouse, Annotation, Proper Measure of Damages
for Misappropriation of Trade Secrets, 11 A.L.R.4th 12. <SUP>2
They include determining the profits that the owner would have
realized had the information remained proprietary. See, e.g.,
Sperry Rand Corp. v. A-T-O, Inc., 447 F.2d 1387, 1392-94 (4th
Cir. 1971). In other cases, the value of the stolen information
has been calculated by determining the profits that the
defendant gained by selling it. See, e.g., Univ. Computing Co.
v. Lykes-Youngstown Corp., 504 F.2d 518, 535-36 (5th Cir.
1974). Courts have also recognized the research and development
costs of the proprietary economic information as a proper
measure of its value. See, e.g., Salsbury Lab., Inc. v. Merieux
Lab., Inc., 735 F. Supp. 1555, 1579 (M.D. Ga. 1989), aff'd in
part and rev'd in part, 908 F.2d 706 (11th Cir. 1990). Other
methods of valuing proprietary economic information may also be
available. The Committee believes that these techniques are
valid.
---------------------------------------------------------------------------
\2\ We recognize that damages in a civil suit are not the exact
equivalent of value. But in the course of determining the compensatory
damages available to a victorious plaintiff, many courts have developed
methods for valuing trade secrets.
---------------------------------------------------------------------------
The actor must knowingly steal the information, or take it
without authorization, or transmit it without authorization. A
knowing state of mind with respect to an element of the offense
is (1) an awareness of the nature of one's conduct, and (2) an
awareness of or a firm belief in or knowledge to a substantial
certainty of the existence of a relevant circumstance, such as
whether the information is proprietary economic information as
defined by this statute. The statute does not require proof
that the actor knew that his conduct violated Federal law. The
Committee intends that the knowing state of mind requirement
may be satisfied by proof that the actor was aware of a high
probability of the existence of the circumstance, although a
defense should succeed if it is proven that the actor actually
and reasonably believed that the circumstance did not exist.
This is similar to the practice of the proposed Model Penal
Code (section 2.02(7)). This approach deals with the situation
that has been called willful blindness, the case of the actor
who is aware of the probable existence of a material fact--for
example, that he has no authority, or that the information is
proprietary--but does not satisfy himself that it does not in
fact exist.
Sec. 1833. Forfeiture
This section is designed to permit recapture of both the
proceeds and implements of the offenses specified in the
chapter. This provision may prove especially telling, since the
proceeds of proprietary economic property theft may be
staggering in certain cases. These forfeiture provisions are
meant to supplement, not replace, the authorized punishments in
appropriate cases. The section incorporates through reference
existing law that sets forth procedures to be used in the
detention, seizure, forfeiture, and ultimate disposition of
property forfeited under this section. It provides for an in
personam action against the offender, rather than only one
against the property itself, and it preserves the rights of
innocent third parties.
Sec. 1834. Import and export sanctions
This section authorizes the President to prohibit, for a
period of up to 5 years, the importation into, or exportation
from, the United States of any product produced, made,
assembled, or manufactured by a person convicted of any offense
under section 1832. This sanction, too, is meant to enhance the
bill's prophylactic effect by imposing another important
sanction on offenders. Any sanctions so imposed are enforceable
through a civil action that may be brought by the Secretary of
the Treasury and which could result in the imposition of a
civil penalty of not less than $100,000. It is anticipated that
this sanction will generally be used against egregious and
persistent violators.
Sec. 1835. Extraterritoriality
To rebut the general presumption against the
extraterritoriality of U.S. criminal laws, this section makes
it clear that the Act is meant to apply to certain conduct
occurring beyond U.S. borders. To ensure that there is some
nexus between the assertion of such jurisdiction and the
offense, extraterritorial jurisdiction exists only if the
offender is a citizen, permanent resident alien, or corporation
of the United States; or an act in furtherance of the offense
is committed in the United States. In pursuing such cases, it
is expected that the Department of Justice will focus its
investigative and prosecutorial resources on those instances in
which there has been a substantial harm to U.S. interests.
Sec. 1836. Construction with other laws
This section makes clear that the Act does not preempt non-
Federal remedies, whether civil or criminal, for dealing with
the theft or misappropriation of economic proprietary
information. Many States have criminalized the theft of
intellectual property, but enforcement may be frustrated by the
ease with which such property is transferred across State or
national boundaries.
Sec. 1837. Preservation of confidentiality
This section authorizes a court to preserve the
confidentiality of alleged proprietary economic information
during legal proceedings under the Act consistent with existing
rules of criminal procedure and evidence, and other applicable
laws. This preserves the information's confidential nature and,
hence, its value. Without such a provision, owners may be
reluctant to cooperate in prosecutions for fear of exposing
their proprietary information to public view--thereby
destroying its worth.
Sec. 1838. Prior authorization requirement
This section requires that the Attorney General, the Deputy
Attorney General, or the Assistant Attorney General for the
Criminal Division of the Department of Justice must personally
approve in advance any charge under this bill. This duty is
nondelegable. This provision has been added as a safeguard
against overzealous invocation of this new law. It is intended
to help ensure that businesses and individuals are not chilled
from making legitimate business decisions.
Sec. 1839. Law enforcement and intelligence activities
This section makes clear that the new chapter does not
prohibit any lawfully authorized investigative, protective, or
intelligence activity of the United States.
Section 4. Wire and Electronic Communications Interception and
Interception of Oral Communications
This provision adds newly created crimes to the list of
offenses which may be investigated with authorized wire, oral,
or electronic intercepts.
V. Regulatory Impact Statement
Pursuant to paragraph 11(b), rule XXVI of the Standing
Rules of the Senate, the Committee, after due consideration,
concludes that Senate bill 1556 will not have direct regulatory
impact.
VI. Cost Estimate
U.S. Congress,
Congressional Budget Office,
Washington, DC, August 21, 1996.
Hon. Orrin G. Hatch,
Chairman, Committee on the Judiciary,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
reviewed S. 1556, the Industrial Espionage Act of 1996, as
reported by the Senate Committee on the Judiciary on July 30,
1996. CBO estimates that enacting the bill would result in no
significant net impact on the federal budget. Enacting S. 1556
would affect direct spending and receipts by increasing the
amount of forfeiture receipts and penalties collected and spent
by the government, but we estimate that such effects would not
occur until after fiscal year 1998. Thus, the bill would not be
subject to pay-as-you-go procedures, which apply only through
fiscal year 1998. In any event, we expect that the bill would
have no significant net effect on the federal budget over time
because receipts from criminal fines and the sale of forfeited
property would be spent, generally within one year of receipt.
Bill Purpose. Enacting S. 1556 would make it a federal
crime to steal proprietary economic information having a value
of at least $100,000 from an owner of such information. Under
current law, cases involving economic espionage are prosecuted
under various statutes; however, none is broad enough to
accommodate most cases of economic espionage. Under this bill,
economic information would include intellectual property as
well as physical property, and violations would include
duplication of information as well as physical theft. Violators
would be subject to imprisonment, criminal fines, and
forfeiture of the property involved in the crime. Enacting this
bill also would allow the President to prohibit a person
convicted of economic espionage from importing goods into, or
exporting goods from, the United States for a period up to five
years. Violators of such Presidential orders would be subject
to civil fines and the forfeiture of related property.
Federal Budgetary Impact. While pursuing investigations
would consume staff time and other resources of the federal
government, CBO estimates that the Department of Justice and
the Federal Bureau of Investigation (FBI) would not need
significant additional resources to enforce the provisions of
the bill over the next several years. Based on information from
the FBI, CBO assumes that few cases would be investigated and
prosecuted over the next several years, but that the caseload
would grow over time. Corporations, which constitute the
majority of victims of industrial espionage, are reluctant to
publicly admit theft out of fear that they would be forced to
reveal proprietary information when the case goes to court. In
addition, prosecutions under this bill would require prior
approval of the Attorney General (AG) or certain members of the
AG staff. As a result of this requirement, CBO anticipates that
the number of cases prosecuted would be kept to a minimum
because prosecutors would only pursue those cases with
substantial evidence. CBO estimates that, in the long term, the
government's caseload could significantly increase and
additional resources could be needed if corporations become
more comfortable with reporting economic espionage and the
government pursues more cases involving economic espionage. Any
such additional resources would be subject to the availability
of appropriated funds.
This bill also would establish penalties--including fines,
imprisonment, and the forfeiture of property involved in the
crime--for violations of the provisions of this bill. Such
criminal fines and receipts from the sale of forfeited property
would be deposited in the Crime Victims Fund and spent in the
following year. Civil penalties would be paid to a receipt
account in the Treasury, but we expect that any such revenues
would not be significant. CBO estimates that because it would
take at least two years to investigate and prosecute a case,
the government would not collect any fines or receipts from the
sale of forfeited property through 1998. Based on conversations
with the FBI, we estimate that additional receipts paid into
the Crime Victims Fund after fiscal year 1998 could exceed $5
million a year. Spending from the fund would increase in the
same amounts, but with a one-year lag. In addition, CBO does
not expect any significant increase in prison costs as a result
of this bill.
Mandate Statement. S. 1556 contains no private-sector or
intergovernmental mandates as defined in the Unfunded Mandates
Reform Act of 1995 (Public Law 104-4), and would have no impact
on the budgets of state, local, or tribal governments.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Jonathan
Womer and Susanne Mehlman.
Sincerely,
June E. O'Neill, Director.
VII. Changes in Existing Law
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, the changes in existing law made
by the bill, as reported by the committee, are shown as follows
(existing law proposed to be omitted is enclosed in bold
brackets, new matter is printed in italic, and existing law
with no changes is printed in roman):
UNITED STATES CODE
* * * * * * *
TITLE 18--CRIMES AND CRIMINAL PROCEDURE
PART I.--CRIMES
Chapter Sec.
1. General provisions............................................. 1
* * * * * * *
89. Professions and occupations................................... 1821
90. Protection of Proprietary Economic Information................ 1831
* * * * * * *
CHAPTER 90--PROTECTION OF PROPRIETARY ECONOMIC INFORMATION
Sec.
1831. Definitions.
1832. Criminal activities affecting proprietary economic information.
1833. Criminal forfeiture.
1834. Import and export sanctions.
1835. Extraterritoriality.
1836. Construction with other laws.
1837. Preservation of confidentiality.
1838. Prior authorization requirement.
1839. Law enforcement and intelligence activities.
Sec. 1831. Definitions
As used in this chapter:
(1) The term ``person'' means a natural person,
corporation, agency, association, institution, or any
other legal, commercial, or business entity.
(2) The term ``proprietary economic information''
means all forms and types of financial, business,
scientific, technical, economic, or engineering
information, including data, plans, tools, mechanisms,
compounds, formulas, designs, prototypes, processes,
procedures, programs, codes, or commercial strategies,
whether tangible or intangible, and whether stored,
compiled, or memorialized physically, electronically,
graphically, photographically, or in writing that--
(A) the owner thereof has taken reasonable
measures to keep such information confidential;
and
(B) the information derives independent
economic value, actual or potential, from not
being generally known to, and not being readily
ascertainable, acquired, or developed by legal
means by the public.
The term does not include any general knowledge,
experience, training, or skill that a person lawfully
has acquired due his work as an employee of or as an
independent contractor for any person.
(3) The term ``owner'' means the person or persons in
whom, or United States Government component,
department, or agency in which, rightful legal,
beneficial, or equitable title to, or license in,
proprietary economic information is reposed.
(4) The term ``United States person'' means--
(A) in the case of a natural person, or
United States citizen or permanent resident
alien; and
(B) in the case of nonnatural person, an
entity substantially owned or controlled by the
United States Government or by United States
citizens or permanent resident aliens, or
incorporated in the United States.
(5) The term ``without authorization'' means not
permitted, expressly or implicitly, by the owner.
Sec. 1832. Criminal activities affecting proprietary economic
information
(a) Any person, with intent to, or reason to believe that
it will, injure any owner of proprietary economic information
having a value of not less than $100,000 and with intent to
convert it to his or her own use or benefit or the use or
benefit of another, who knowingly--
(1) steals, or without authorization appropriates,
takes, carries away, or conceals, or by fraud,
artifice, or deception obtains such information;
(2) without authorization copies, duplicates,
sketches, draws, photographs, downloads, uploads,
alters, destroys, photocopies, replicates, transmits,
delivers, sends, mails, communicates, or conveys such
information;
(3) receives, buys, or possesses such information,
knowing the same to have been stolen or appropriated,
obtained, or converted without authorization;
(4) attempts to commit any offense described in
paragraphs (1) through (3);
(5) wrongfully solicits another to commit any offense
described in paragraphs (1) through (3); or
(6) conspires with one or more other persons to
commit any offense described in paragraphs (1) through
(3), and one or more of such persons do any act to
effect the object of the conspiracy,
shall, except as provided in subsection (b), be fined up to
$250,000, or twice the value of the proprietary economic
information, whichever is greater, or imprisoned not more than
10 years, or both.
(b) Any corporation that commits any offense described in
paragraphs (1) through (6) of subsection (a) shall be fined up
to $10,000,000, or twice the economic value of the proprietary
economic information, whichever is greater.
(c) This section does not prohibit the reporting of any
suspected criminal activity or regulatory violation to any
appropriate agency or instrumentality of the United States, or
a political subdivision of a State, or to Congress.
Sec. 1833. Criminal forfeiture
(a) Notwithstanding any provision of State law, any person
convicted of a violation under this chapter shall forfeit to
the United States--
(1) any property, constituting or derived from, any
proceeds the person obtained, directly or indirectly,
as the result of such violations; and
(2) 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.
(b) The court, in imposing a sentence on such person, shall
order, in addition to any other sentence imposed pursuant to
this chapter, that the person forfeit to the United States all
property described in this section.
(c) 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
section 413 of the Comprehensive Drug Abuse Prevention and
Control Act of 1970 (21 U.S.C. 853), except for subsection
413(d) which shall not apply to forfeitures under this section.
(d) Notwithstanding section 524(c) of title 28, there shall
be deposited in the Crime Victims Fund established under
section 1402 of the Victims of Crime Act of 1984 (42 U.S.C.
10601) all amounts from the forfeiture of property under this
section remaining after the payment of expenses and sale
authorized by law.
Sec. 1834. Import and export sanctions
(a) The President may, to the extent consistent with
international agreements to which the United States is a party,
prohibit, for a period of not longer than 5 years, the
importation into, or exportation from, the United States,
whether by carriage of tangible items or by transmission, any
merchandise produced, made, assembled, or manufactured by a
person convicted of any offense described in section 1832 of
this title, or in the case of an organization convicted of any
offense described in such section, its successor entity or
entities.
(b)(1) The Secretary of the Treasury may impose on any
person who knowingly violates any order of the President issued
under the authority of this section, a civil penalty equal to
not more than 5 times the value of the exports or imports
involved, or $100,000, whichever is greater.
(2) Any merchandise imported or exported in violation of an
order of the President issued under this section shall be
subject to seizure and forfeiture in accordance with sections
602 through 619 of the Tariff Act of 1930.
(3) The provisions of law relating to seizure, summary and
judicial forfeiture, and condemnation of property for violation
of the United States customs laws, the disposition of such
property or the proceeds from the sale thereof, the remission
or mitigation of such forfeiture, and the compromise of claims,
shall apply to seizures and forfeitures incurred, or alleged to
have been incurred under this section to the extent that they
are applicable and not inconsistent with the provisions of this
chapter.
Sec. 1835. Extraterritoriality
(a) This chapter applies to conduct occurring within the
United States.
(b) This chapter applies to conduct occurring outside the
territorial and special maritime jurisdiction of the United
States, its territories, and possessions if--
(1) the offender is a United States person; or
(2) an act in furtherance of the offense was
committed in the United States.
Sec. 1836. Construction with other laws
This chapter shall not be construed to preempt or displace
any other Federal or State remedies, whether civil or criminal,
for the misappropriation of proprietary economic information,
or to affect the otherwise lawful disclosure of information by
any government employee under section 552 of title 5 (commonly
known as the Freedom of Information Act).
Sec. 1837. Preservation of confidentiality
In any prosecution under this chapter, the court may enter
such orders and take such other action as may be necessary and
appropriate to preserve the confidentiality of proprietary
economic information, consistent with rule 16 of the Federal
Rules of Criminal Procedure, the Federal Rules of Evidence, and
other applicable laws. An interlocutory appeal by the United
States shall lie from a decision or order of a district court
authorizing the disclosure of proprietary economic information.
Sec. 1838. Prior authorization requirement
The United States may not file a charge under this chapter
or use a violation of this chapter as a predicate offense under
any other law without the personal approval of the Attorney
General, the Deputy Attorney General, or the Assistant Attorney
General for the Criminal Division of the Department of Justice.
Sec. 1839. Law enforcement and intelligence activities
This chapter does not prohibit any and shall not impair
otherwise lawful activity conducted by an agency or
instrumentality of the United States, a State, or a political
subdivision of a State, or an intelligence agency of the United
States.
* * * * * * *
CHAPTER 119--WIRE INTERCEPTION AND INTERCEPTION OF ORAL COMMUNICATIONS
* * * * * * *
Sec. 2516. Authorization for interception of wire, oral, or electronic
communications
(1) The Attorney General, Deputy Attorney General,
Associate Attorney General, or any Assistant Attorney General,
any acting Assistant Attorney General, or any Deputy Assistant
Attorney General in the Criminal Division specially designated
by the Attorney General, may authorize an application to a
Federal judge of competent jurisdiction for, and such judge may
grant in conformity with section 2518 of this chapter an order
authorizing or approving the interception of wire or oral
communications by the Federal Bureau of Investigation, or a
Federal agency having responsibility for the investigation of
the offense as to which the application is made, when such
interception may provide or has provided evidence of--
(a) any offense punishable by death or by
imprisonment for more than one year under sections 2274
through 2277 of title 42 of the United States Code
(relating to the enforcement of the Atomic Energy Act
of 1954), section 2284 of title 42 of the United States
Code (relating to sabotage of nuclear facilities or
fuel), or under the following chapters of this title:
chapter 90 (relating to economic espionage and
protection of proprietary economic information in
interstate and foreign commerce), chapter 37 (relating
to espionage), chapter 105 (relating to sabotage),
chapter 115 (relating to treason), chapter 102
(relating to riots) chapter 65 (relating to malicious
mischief), chapter 111 (relating to destruction of
vessels), or chapter 81 (relating to piracy);
<greek-d>
|
NEWSLETTER
|
|
Join the GlobalSecurity.org mailing list
|
|
|
