WASHINGTON – U.S. Senator Herb Kohl today introduced the “Economic Espionage Penalty Enhancement Act of 2011” to increase maximum penalties for stealing a trade secret to benefit a foreign company.  The Federal Bureau of Investigation (FBI) estimates that U.S. companies lose billions of dollars each year to criminals who steal their ideas, formulas, designs and other proprietary information.  Just last year, a Chinese national working for an American automobile manufacturer was convicted of stealing trade secrets for a Chinese competitor.  His actions were estimated to cost the American company between $50 and $100 million.  The chief executive of GM recently said that industrial espionage is a major threat to the company and that he worries about it “every day.”  

“Without freedom from economic sabotage, our companies lose their hard-earned advantages and their competitive edge,” Kohl said.  “Businesses spend every resource at their disposal to develop proprietary economic information including their customer lists, pricing schedules, business agreements, and manufacturing processes, to name a few. This information is literally a business's lifeblood. And stealing it can be the death knell for a company.”

In 1996 Congress enacted the Economic Espionage Act, making it a federal crime to steal a trade secret.  Nearly fifteen years later, trade secret theft has grown and evolved and economic espionage continue to pose a threat to U.S. companies. 

At a Senate Judiciary Committee hearing this morning, Kohl asked FBI Director Robert Mueller III if he would support his legislation to increase penalties for stealing trade secrets.  Mueller indicated that the Department of Justice would need to be consulted, but it was his expectation that enhanced penalties would be looked favorably upon.

U.S. corporations face intense competition at home and abroad.  As much as 80% of the assets of today’s companies are intangible trade secrets.  They must be able to protect their trade secrets to remain competitive and keep our economy strong.  Advances in technology make the protection of trade secrets more difficult and more critical than ever.  Trade secrets can simply be downloaded from a company’s computer, uploaded to the Internet, and transferred anywhere in the world in a matter of minutes.  Within a matter of days, a U.S. corporation can lose complete control over its trade secrets. 

In 2009, a Chinese-born engineer who had been employed by a leading aerospace company was convicted of economic espionage and sentenced to fifteen years in prison for collecting sensitive information about the U.S. space shuttle that he intended to share with the Chinese government. Prior to his sentencing, the district court judge said that although we do not know how much information he shared with China, we do know that he hurt not only his former employer but also the national security of the United States.  

The Economic Espionage Penalty Enhancement Act will increase the maximum sentence for economic espionage from 15 years to 20 years and direct the Sentencing Commission to consider increasing the penalty range for theft of trade secrets and economic espionage. The bill is intended to be a starting point for a larger discussion about the implementation of the Economic Espionage Act and whether additional updates and improvements are needed in light of the global economy and advances in technology.  The measures in Kohl’s bill were recommended to Congress by the U.S. Intellectual Property Enforcement Coordinator, in conjunction with the Departments of Commerce, Homeland Security, Justice and State, and the U.S. Trade Representative.