ECONOMIC
ESPIONAGE
SABT Parker Shipley
Program Coordinator
Milwaukee Field Office
UNCLASSIFIED
Objectives
•Importance of Intellectual Property (IP)
•Threat Awareness
•Signs of Economic Espionage
•Protective Measures
FBI Priorities
Protect the United States…
1. From terrorist attack.
2. Against foreign intelligence operations
and espionage.
STRATEGIC PARTNERSHIP
PROGRAM
Partnership with public and private
entities to protect the national and
economic security of the United
States through the exchange of
information
What is Intellectual Property Theft?
Protect your IP like your ID
SM
What is Intellectual Property?
All types of information:
• Financial
• Business
• Scientific
• Technical
• Economic
• Engineering information
• Patterns
• Plans
• Codes
•
•
•
•
•
•
•
•
•
Compilations
Designs
Formulas & Recipes
Prototypes
Methods
Techniques
Processes
Procedures
Programs
No Matter What Form
• Tangible:
• Intangible: No matter how stored or compiled:
Value of Intellectual Property
IP has value because of its:
•Economic value, actual or potential
•Not being generally known by and ascertainable to
the public.
What stolen IP can cost you:
• Research and development costs
• Manufacturing and production costs
• Proceeds from licensing the IP or trade secret
Importance of Theoretical Research
Letter from Albert Einstein to President Franklin D. Roosevelt,
dated 8/2/1939
+
=
“ the element uranium may be turned into a new and
important source of energy in the immediate future.”
“ This new phenomenon would also lead to the
construction of bombs, ”
History of Economic Espionage:
Silkworm Theft in the 6th Century
•For centuries, making silk
was an ancient Chinese secret.
•550 AD two Nestorian Monks
stole silkworm eggs hidden in
their hollow bamboo staves
•Gave eggs to Byzantine
Emperor, Justinians.
•One of the earliest known
examples of economic
espionage
Examples In Our Time
US F-22A
PRC J-20
Sukoi T-50
Current Threat
• More than 106 countries have targeted U.S. IP.
• 92% of IP targeted was unclassified.
• World economic and military pressures will force
foreign countries to steal more U.S. IP.
• U.S. losses = $200 Billion + a year
The Threat
CHINA
RUSSIA
IRAN
Where’s The Threat ?
COLD WAR
• Military
• Government
• Intelligence
Agencies
• Big Defense
Contractors
• Larger Cities
VS.
•
•
•
•
NOW
Any IP or Technology
Small Companies
Small Cities
All the Former Targets
Still Fare Game
Threat to Corporate America
USA Today
7/29/10
Insiders Are the Biggest Threat
75% of reported cases
“The strongest castle walls are not
proof against a traitor within”
- Ancient Proverb
Targeted IP and Technology
Civilian Technologies
(Restricted or Proprietary)
Pharmaceuticals
Biometrics
Nanotech/Miniaturization
Manufacturing Processes
Public Safety Systems
Patent Rights
Biotechnology
What The Threat is Looking For
Milwaukee Journal Sentinel 2/7/10
Economic Espionage Act of 1996
Economic Espionage – 18 USC 1831
Stealing IP for any foreign government, foreign
instrumentality or foreign agent.
15 years prison & $500,000 Fine, Org. $10 Mil Fine
Theft of Trade Secrets – 18 USC 1832
Stealing IP for purely economic advantage.
10 years prison & $250,000 Fine, Org. $5 Mil Fine
Reasonable IP protection needed for prosecution
Methods Used to Target Technology
Unsolicited e-mails
Front companies
Liaison with universities
that have ties to defense
contractors
Recruitment by foreign
intelligence services
Researchers and facilities
relocated overseas
Circumventing
export control
laws
Visiting scientific and
Exploiting Multi-National
research delegations
Conferences, Business
exchanges or Joint Ventures
Source: National Counterintelligence Center Annual Report to Congress on
Counterintelligence and Industrial Espionage
Victim Companies
•L-3 Communications
•IBM
•Coca Cola
•Cleveland Clinic
•Bristol Myers
•Caterpillar
•Kraft Foods
•Motorola
•Gillette Company
•Avery Dennison
•Deloitte & Touche
•PPG
•Wilsonart Int’l
•Lucent Technology
•Idexx Labs
•Mastercard
•Sun Microsystems
•3M
Signs You are an IP Theft Victim
1. Competition Suddenly Emerges
2. Market Share Decreases
3. Profit Margins Decrease
4. Revenues Decline
5. Management Confused
6. Management has Solution
-Leave the Market
-Sellout to Competition
Source: Kevin Swailes, Global Sec Dir,
GE Energy, 11/2009
How to look for IP Theft?
1. Internet Searches
2. Conferences & Trade Shows
3. Ads or Brochures of Products
4. Trade Publications
5. Liaison w/ Others in Industry
6. Searches in Legal Databases
7. Media Reports of IP Theft
Methods for economic protection
How to Protect Your IP from the threat
1. Recognize there is a threat.
2.
Identify and valuate trade secrets.
3.
Implement a definable plan for safeguarding trade secrets.
4.
Secure physical trade secrets and limit access to them.
5.
Confine intellectual knowledge.
6.
Provide ongoing security training to employees.
Protective Measures
• Lock up the information
• Require confidentiality and
Nondisclosure Agreements (NDAs)
• Restrict access on sensitive
information to need to know
• Encrypt secrets kept in electronic
files
• Mark documents as proprietary,
sensitive or restricted, etc.
• Secure and shred garbage
What to do if you suspect IP theft ?
•
•
•
•
Notify your mgt or security dept. ASAP.
Take internal steps to stop the loss.
Document the issue.
Call us we can help.
Legal processes are available to us (Grand
Jury Subpoenas, Search Warrants)
• Economic Espionage is our responsibility
• Running a successful business is yours
What not to do?
• Ignore the warning signs
• Cover up a problem
• Keep it quiet
• Fire and forget
(leave the problem for someone else)
Super Vision Case Example
Super Vision Case Example
•IP Theft by PRC
Company
•Used Insider
•$ 5-6+ mil in loss
•$42 Mil Judgment
(still trying to collect )
Chi Mak Case Example
•Naturalized US Citizen from PRC
•Worked Power Paragon of L-3 Comm
•Quiet Elec Drive (QED) for US Navy
•Stole QED Info for PRC
•Admitted Sleeper Agent 20+ years
•Arrested in 2005
•Convicted 5 Felonies in 2007
•Sentenced to 24 years in prison
Coke Case Example
•Joya Willams, Exec Admin Asst.
•2 other co-conspirators
•Sent Pepsi a letter in 2006
•14 pgs of sensitive Coke IP to
undercover agent
•Wanted 1.5 mil for more IP
• All Convicted in 2007
•Sentenced 8 Years in Prison
One Final Thought For You
Protect your IP like your ID
SM
QUESTIONS?
SABT Parker Shipley
Milwaukee Field Office
FBI
414-276-4684