In Depth

Industrial Espionage: Secrets Stolen, Fortunes Lost

How industrial espionage and intellectual property theft destroy businesses and endanger the global economy.

By Richard Power and Christopher Burgess

Page 4

The best approach is to maintain the current policy, except when U.S. corporate interests are specifically targeted by a foreign government-sponsored activity, or when the economic playing field must be leveled. The U.S. government's abilities should be dedicated to national security issues. No U.S. intelligence officer should put his or her life in jeopardy to improve shareholder value. The ultimate sacrifice should be reserved only for the nation's security.

According to a study published by USA for Innovation (www.usaforinnovation.org) in late October 2005, intellectual property in the United States alone carried the value of US$5 trillion to $5.5 trillion, equivalent to 45 percent of the gross domestic product, far larger than the GDP of any other nation. The intellectual property retained by U.S. companies is central to U.S. economic security. This study also indicates that a direct correlation exists between the level of a nation state's protection of foreign-owned intellectual property and the level of foreign investment in that same country-i.e., where the state offers increased protection of the investor's intellectual property, investors increase their investment in the nation's economy.

The United States is under economic attack, according to the National Counterintelligence Executive's report to U.S. Congress in February 2005. The report goes into some depth in identifying the types of foreign entities conducting industrial and economic espionage, the kind of information targeted by these foreign entities, and which foreign entities are attempting to acquire sensitive U.S. technology (either classified or proprietary)-be they private or governmental.

The report indicates that individuals from almost 100 separate countries attempted to acquire sensitive U.S. information. Characterizing the role of the state-supported intelligence collection effort against U.S. technology and intellectual property, it states: "It is clear, however, that some foreign countries, including the major players, also continued to employ state actors-including their intelligence services-as well as commercial enterprises, particularly when seeking the most sensitive and difficult to acquire technologies."

The report identified several dual-use areas as being targeted, including:

Information systems

Military production processes and communication systems

Aeronautics

Electronics

Armaments

Energy materials

The report laments the difficulty of tracking the foreign targeting of purely civilian technologies, and highlights U.S. organizations' reluctance to share information. Such reluctance, it opines, is due to their not wishing to highlight their losses, because such revelations could have a deleterious effect on "investor and consumer confidence and stock prices."

Commercial technologies identified as stolen by foreign entities included:

Semiconductor production processes

Computer microprocessors

Software

Proprietary information

Chemical formulas

The U.S. counterintelligence community expects no decline in foreign intelligence activities, and also notes that stemming the flow of information will become even more difficult. The report specifically mentions the challenge of isolating trade secrets from foreign managers and employees and U.S. companies' increasing practice of placing their research and development centers in foreign environs.