This article was originally published in the Summer 2020 edition of IWP’s student journal, Active Measures.
This paper seeks to examine the technicalities that limit the Economic Espionage Act (EEA) and offer policy recommendations for enhancing its practicality and bolstering its usefulness as a tool to fight economic espionage found to be committed against the United States. The ideas presented in this essay come at a crucial time when forward thinking regarding the issue of how best to tackle and prosecute the known attempts at stealing U.S. trade secrets continues to puzzle Intelligence Community officials and lawmakers alike.
Crimes of industrial espionage have become some of the biggest threats to American national security in the 21st century and often result in failed litigation. Corporate America and smaller private firms that develop unique and original trade secrets require bolstered laws and stronger educational programs that assist in the defense against intellectual property (IP) theft. Additionally, the government must ensure that the U.S. intelligence community is equipped with the proper legal tools to promote the successful prosecution of those guilty of economic espionage. To achieve these goals, I propose three main policy options: primarily, the legal departments within the Department of Justice (DOJ) should be merged to cut down the number of department filters through which economic espionage cases pass; second, amendments should be made to the language of section 6001 of the IRTPA and incorporated into the EEA; third, there should be an issuance of another organizational amendment that establishes a primary point of contact/bureau within the U.S. State Department’s Intellectual Property Enforcement (IPE) office that private attorneys could contact for help when representing clients in international IP cases.
The EEA falls under title 18 of the U.S. Code and is therefore a criminal statute. The law states that, in general terms, economic espionage is “the unlawful or clandestine targeting or acquisition of sensitive financial, trade or economic policy information; proprietary economic information; or technological information.”[1] Formally, The Economic Espionage Act of 1996 (EEA), 18 U.S.C. §§ 1831-1839, “defines the term ‘economic espionage’ as the theft or misappropriation of a trade secret with the intent or knowledge that the offense will benefit any foreign government, foreign instrumentality, or foreign agent.”[2] The act of receiving, purchasing, or possessing a trade secret known to have been stolen or misappropriated, as well as any attempt or conspiracy to commit economic espionage, is punishable as a federal crime under the EEA.[3]
Because the Economic Espionage Act falls under title 18 of the U.S. federal code, it leaves no room for private action to be taken by U.S. citizens/corporations against those accused of intellectual property theft. This means that private corporations seeking to pursue litigation/prosecution against the accused IP thief must first appeal to the Federal Bureau of Investigation (FBI) to open an inquiry into the matter and then convince a federal prosecutor that there is a case to be tried in the first place.[4] Hedi Nasheri, a senior research fellow at New York University’s Law School Center for Research in Crime and Justice, further explains that “[…] as a general rule, U.S. attorneys’ offices are not set up to prosecute violations of the EEA in the same manner in which, for example, they routinely prosecute drug or gun crimes. Not only that, federal regulations require that EEA prosecutions be cleared by the Justice Department in Washington. Specifically, prosecutions for foreign-related thefts must be approved by the Computer Crime and Intellectual Property Section of the Criminal Division, while domestic-only cases must be approved by the Internal Security Section before indictments may be issued.”[5] Nasheri’s apt analysis reveals that there is perhaps a bureaucratic structural overcomplication hindering our federal prosecutor’s willingness and ability to effectively employ the EEA.
However, it is in our best interest to explore options that cut down on the number of department filters that economic espionage cases need to go through before indictments can be issued. To remedy this situation, the Computer Crime and Intellectual Property Section (CCIPS) of the Criminal Division responsible for cases pertaining to economic espionage ought to be integrated into the National Security Division (NSD) of the Department of Justice. Although the EEA is criminal in nature, the ethos of economic espionage cases lend themselves to the work of the IC and are thus better aligned with the primary mission of the NSD which is, “To protect the United States from threats to our national security by pursuing justice through the law.”[6]
Alternatively, the CCIPS could be merged with the Litigation Section (LS) within the NSD. The LS “reviews and prepares requests for Attorney General authorization to use [Foreign Intelligence Surveillance Act] (FISA) information in criminal and non-criminal proceedings.”[7] The section also drafts motions and briefs and responds to defense motions to disclose FISA applications and to suppress the fruits of FISA collection. Finally, the section works to ensure the consistent application of FISA in trial and appellate courts nationwide. To support this effort, the NSD in January 2008 developed a new policy, which was “… Approved by the Attorney General, for investigators and prosecutors on the use of information obtained or derived from FISA collections.”[8] Merging the CCIPS with a section which is heavily involved in FISA carries great advantages that could very well bolster the efficiency and evidence-gathering power of the newly combined sections, and may result in a higher number of full penalty prosecutions per economic espionage trial, thus making it a stronger deterrent to nefarious activity of this nature.
Delving further into FISA, the language found in section 6001 of the Intelligence Reform and Terrorism Prevention Act of 2004, P.L. 108-458 could be amended and incorporated into economic espionage law that would allow the FBI to employ FISA with greater ease in cases pertaining to industrial espionage. Specifically, this section amended the definition of an “Agent of a foreign power” in FISA, 50 U.S.C. § 1801(b)(1), to add a new class of covered individuals. Under the new “lone wolf” provision, “… a non-United States person who engages in international terrorism or activities in preparation for international terrorism is deemed to be an ‘agent of a foreign power under FISA.”[9] Moreover, it is important to understand that “The […] provision does not change the procedures to be used to apply for a court order authorizing electronic surveillance or a physical search under FISA. If an order is sought under this definition of an ‘agent of a foreign power,’ however, the applicant is not required to demonstrate a connection between the target of the electronic surveillance or physical search and a foreign nation, foreign group, or international terrorist group. Nor does the Foreign Intelligence Surveillance Court (FISC), in approving such an order, have to find probable cause to believe that such a connection existed. Rather, if the court authorizes such a surveillance or physical search using this new definition of ‘agent of a foreign power,’ the FISC judge has to find, in pertinent part, that, based upon the information provided by the applicant for the order, the target had engaged in or was engaging in international terrorism or activities in preparation therefor.”[10] Simply stated, if the amendment is not renewed at its sunset clause date on March 15th, 2020[11], then the standard for obtaining FISA orders will revert back to necessitating probable cause, which is a higher burden of proof, showing the person to be acting on behalf of a particular entity engaged in international terrorism, or in this case, economic espionage.[12]
Unfortunately, there are limited viable solutions or propagable amendments that would allow corporations and individual entities to pursue independent prosecution against IP thieves. However, it may be possible, from a federal perspective, to incorporate language from the Justice Against Sponsors of Terrorism Act (JASTA) that could possibly allow private citizens to pursue independent action against foreign agents engaged in economic espionage. In its inception, the JASTA act stated that U.S. citizens were permitted to sue a foreign state if such state was designated as a state sponsor of terrorism by the United States Department of State and if they were harmed by that state’s aid for international terrorism.[13] JASTA authorizes federal courts to exercise subject matter jurisdiction over any foreign state’s support for acts of international terrorism against a U.S. national or property regardless of whether such state is designated as a state sponsor of terrorism or not.[14] This section of the act could be reworded to state that U.S. citizens are permitted to sue a foreign state, or foreign agent, if it is found that said foreign state, or agent, was discovered to be conducting and or supporting actions that are, or are perceived to be, pertaining to the conduct of economic/industrial espionage activities against U.S. businesses operating domestically or abroad by the U.S. Department of State; furthermore, U.S. citizens would be permitted to sue said actors if they were harmed by their attempts at economic/industrial espionage.
This new definition would provide statutory justification for private action at the behest of privately owned corporations in criminal cases brought against states or individuals suspected of economic or industrial espionage. Additionally, “The practical effect of the [original] legislation was to allow the continuation of a longstanding civil lawsuit brought by the families of victims of the September 11 attacks against Saudi Arabia for its government’s alleged role in the attacks.”[15] This same rationale can be applied to the EEA, as it would again allow those harmed by economic or industrial espionage to pursue civil lawsuits against foreign agents or actors discovered to be conducting economic/industrial espionage against U.S. businesses operating domestically or abroad. Concomitantly, it is critical to acknowledge that the original JASTA act does not identify Saudi Arabia by name, as identifying another country in federal legal matters could have massive diplomatic and international relations implications. Therefore, any amendments made to the EEA to include language of this nature should follow suit and remain ambiguous so as not to blatantly target or identify any one nation in particular.
Prospects of enforcing the penalties associated with economic espionage are another matter entirely and remain low, as there are few ways of enforcing legal matters in countries like China, which has proven to be the biggest threat to American trade secrets today. Paul Chan, the Managing Principal and a trial lawyer at Bird Marella in Los Angeles, writes that, “Although China is a member of the Hague Convention, requests to serve a resident of mainland China with legal process must be coordinated through China’s Central Authority, and efforts by the Chinese authorities to perfect service of process in China are not dependable. U.S. courts therefore lack power to reliably compel the appearance or participation of Chinese residents in U.S. legal proceedings. And historically, U.S. civil judgments have not been enforceable in China. Given these significant limitations in the enforcement and collection of private money judgments, it would not be unreasonable to expect that private litigants contemplating the costs of cross-border litigation, without the resources of the U.S. government at their backing, will necessarily be more selective in deciding what types of civil litigation to pursue against Chinese adversaries.”[16]
For example, Dan Harris, founder of the Harris Bricken international law firm, confirms that there are only a handful of viable ways for private citizens to approach trademark and IP theft when dealing with China. Non-usage clauses and legal workarounds are among the go-to responses for many lawyers dealing with clients embroiled in these cases. However, if all else fails, the final legal option available to private litigants is an attempt to purchase their trademark and IP back from the company that stole it.[17] Unfortunately, Harris explains that this tends to be tougher and more expensive than one likely would expect. Litigants must facilitate these purchases by obtaining a Chinese citizen (not a lawyer or anyone with any apparent connection to the law firm) residing in China to facilitate the negotiations.[18] Avoiding suspicions of American involvement in the negotiations is key, as any such hints would signal that the law firm is operating for an American company. Exposure of this knowledge to the Chinese thief corporation would then, in turn, exponentially increase the amount of money required for a company to reclaim the trademark in question.[19] It may make more sense to establish a company in Hong Kong to conduct the process, due to the fact that “…The Hague options available to an individual in cases pertaining to Hong Kong are more varied, but considerably faster, easier, and more likely to lead to an enforceable judgment.”[20],[21]
The process for filing a case through The Hague Convention in China requires strict adherence to Article 5 stipulations. All requests coming through China’s central authority must follow the subsequent steps, beginning with filing a Hague Evidence Request. The side pursuing litigation must absorb the cost, which may be substantial, to fully translate all relevant documents pertaining to the case. According to China’s declaration to Article 5(3), “…Although the defendant may speak flawless English, omitting translated documents will prompt the Central Authority to reject a request. And for [the sake of clarity] get the right written form of Chinese, which is simplified.”[22] Additionally, if the defendant is a company, it would be wise to “Hire an investigator to ascertain the appropriate address for service. It may not appear anywhere in the documents that have already been exchanged, and if the wrong address is provided, the Central Authority can reject the request. […] In any of these circumstances, the case will be rejected and thrown away.”[23] Moreover, if it is a U.S. action, then, “The party pursuing litigation must wire $95 to the Central Authority. The Convention arguably prohibits the assessment of fees, but the United States charges $95, so China returns the favor on a reciprocal basis.”[24] Lastly, the party pursuing litigation must fill out a USM-94 completely and ensure that it is signed by a court official, attorney, or person that is commissioned to do so by the court.[25]
After considering the lengthy process that a citizen or corporation must go through to pursue action against a Chinese party, it would be wise to issue another organizational amendment, in addition to moving the CCID to the LS, to establish a primary point of contact/bureau within the U.S. State Department’s Intellectual Property Enforcement (IPE) office that private attorneys can contact for help when representing clients in international IP cases. As it stands, the IPE works with the Bureau of International Narcotics and Law Enforcement (INL) through “the International Computer Hacking and Intellectual Property (ICHIP) program. ICHIPs are experienced DOJ attorneys placed at U.S. embassies in key regions to enhance foreign law enforcement partner capacity to investigate and prosecute IPR crimes.”[26] Additionally, the IPE maintains an IP Attaché program. The IPE Team “works with the United States Patent and Trademark Offices to place the IP Attachés at several embassies and consulates. IP Attachés are technical experts who work to improve IP systems internationally. The Attachés advocate to improve IP policies, laws, and regulations abroad for the benefit of U.S. businesses and stakeholders.”[27] This program could double as an effective tool to inform and teach U.S. business owners about best practices when it comes to economic espionage and IP security in the workplace. The Attaché would also be an invaluable consultation resource for U.S. attorneys and provide an excellent non-legal option for combating economic espionage through passive educational and non-provocative/accusatory means.
Intellectual property theft has become a large-scale threat to U.S. national security in 2020. The legal means laid out in this paper by which the U.S. can explore new and creative ways to combat/mitigate the effects of IP theft and economic espionage are predicated on the assumption that new language can/will be added to existing laws and statutes. These amendments would ultimately allow for easier prosecution of those who commit economic espionage against the U.S. Additionally, it is imperative that organizational and structural changes be made to the American bureaucracy to allow for the removal of the proverbial red tape which prevents or discourages economic espionage cases from ever being brought to trial in the first place. Lastly, we must continue to bolster the educational and professional resources available to private citizens and non-federal attorneys so we can attack the issue of economic espionage from a self-help standpoint.
[1]18 U.S.C. § 1831. Economic espionage. 2019. Cornell Law School Legal Information Institute, https://www.law.cornell.edu/wex/economic_espionage#:~:text=The%20Economic%20Espionage%20Act%20of,foreign%20instrumentality%2C%20or%20foreign%20agent., accessed October 8, 2020.
[2] Ibid.
[3] Ibid.
[4] Nasheri, Hedi. The Challenge of Economic Espionage. 2012.
[5] Nasheri, Hedi. “The Challenge of Economic Espionage.” June 5, 2012, World Politics Review. https://www.worldpoliticsreview.com/articles/12025/the-challenge-of-economic-espionage, accessed October 8, 2020.
[6] United States Department of Justice, About the Division, https://www.justice.gov/nsd/about-division, accessed October 8, 2020.
[7] United States Department of Justice, Sections and Offices, https://www.justice.gov/nsd/sections-offices, accessed October 8, 2020.
[8] Ibid.
[9] Bazan, Elizabeth B. “Intelligence Reform and Terrorism Prevention Act of 2004: ‘Lone Wolf’ Amendment to the Foreign Intelligence Surveillance Act,” 2004, https://fas.org/irp/crs/RS22011.pdf, accessed October 8, 2020.
[10] Ibid.
[11] https://docs.house.gov/billsthisweek/20191118/BILLS-116HR3055SA-RCP116-38.pdf. SEC. 1703. Sunsets
[12] Chesney, Robert. “Three FISA Authorities Sunset in December: Here’s What You Need to Know” January 16, 2019, Lawfare, https://www.lawfareblog.com/three-fisa-authorities-sunset-december-heres-what-you-need-know, accessed October 8, 2020.
[13] Pub. L. 114-222 Justice Against Sponsors of Terrorism Act, https://www.congress.gov/114/plaws/publ222/PLAW-114publ222.htm, accessed October 8, 2020.
[14] Ibid.
[15] United States Congress. S.2040 – Justice Against Sponsors of Terrorism Act, https://www.congress.gov/bill/114th-congress/senate-bill/2040/text, accessed October 8, 2020.
[16] Chan, Paul S. “The Rise in Economic Espionage Cases Involving China,” May 9. 2019, Bloomberg Law, https://news.bloomberglaw.com/white-collar-and-criminal-law/insight-the-rise-in-economic-espionage-cases-involving-china, accessed October 8, 2020.
[17] Harris, Dan. “China Trademark Theft. It’s Baaaaaack in a Big Way,” August 16, 2018, China Law Blog, https://www.chinalawblog.com/2018/08/china-trademark-theft-its-baaaaaack-in-a-big-way.html, accessed October 8, 2020.
[18] Ibid.
[19] Ibid.
[20] Lukken, Aaron. “How to Serve Process in China,” January 12, 2017, Hague Law Blog, https://www.haguelawblog.com/2017/01/serve-process-china/, accessed October 8, 2020.
[21] Harris, Dan. China Trademark Theft. It’s Baaaaaack in a Big Way, 2018.
[22] Lukken, Aaron. How to Serve Process in China. 2017.
[23] Ibid.
[24] Ibid.
[25] Ibid.
[26] U.S. State Department, IP Enforcement Abroad, https://www.state.gov/intellectual-property-enforcement/ip-enforcement-abroad/, accessed October 8, 2020.
[27] Ibid.