Economic Espionage in 2017 and Beyond: 10 Shocking Ways They Are Stealing Your Intellectual Property and Corporate Mojo

Introduction
“The loss of industrial information and intellectual property through cyber espionage constitutes the ‘greatest transfer of wealth in history,’” said Gen. Keith Alexander—at the time, the nation’s top cyber warrior.
In recent years, the problem of countries, companies, and individuals misappropriating the trade secrets of U.S. companies has only become bigger, more insidious, and more expensive to address, and lawyers and business executives have no choice but to deal with this increasingly complex problem. According to the U.S. Department of Commerce, intellectual property (IP) accounted for $5.06 trillion in value added, or 34.8 percent of U.S. GDP in 2010. IP alone accounts for over 40 million U.S. jobs and over 60 percent of all U.S. exports. U.S. companies have a lot to lose.
Economic espionage (sometimes called industrial espionage) is a major drain on competitive advantage, unique IP, and market share. Not only are U.S. companies directly hurt by the theft of their IP, but they may end up competing against their own technology advanced by the IP thief. Susan Brewer & Anthony Crescenzi, State-Sponsored Crime: The Futility of the Economic Espionage Act, Hous. J. of Int’l L. (Summer 2016). For example, “American oil and gas firms are frequently targeted and subject to theft of trade secret, business plans, exploration bids and geological data.” Blake Clayton & Adam Segal, Addressing Cyber Threats to Oil and Gas Suppliers, Council on Foreign Relations (June 2013).
Economic espionage is not new. What is new is the way IP is stolen. Cyber attacks are the most used method that other nations, companies, and criminals employ to root out and steal your IP and other valuable or sensitive information. It is our increased dependency on IT systems and networks that creates vulnerabilities, even though there are such obvious benefits and uses to them.
In May 2013, the Commission on the Theft of American Intellectual Property released a report that concluded that the scale of international theft of American intellectual property is . . . roughly $300 billion per year and 2.1 million additional jobs now in our economy. While China is not the only actor targeting U.S. IP and technology, it is the only nation that considers acquiring foreign science and technology a national growth strategy.
U.S. Congressional Committee on Energy and Commerce Hearing, Cyber Espionage and the Theft of U.S. Intellectual Property and Technology (July 3, 2013). So, depending on how you calculate the impact of economic espionage to U.S. businesses, it can mean a loss of roughly a billion dollars a day or more.
Did the September Agreement between China and the United States Address the Problem?
By some accounts, U.S. cyber espionage concerns subsided on September 25, 2015, when China unexpectedly agreed with the United States (and, later, other countries) to refrain from cyber economic espionage. It remains to be seen whether China ceases its governmental involvement in cyber economic espionage, although there is good reason to be skeptical. The “understanding” did not cover other forms of economic espionage, only the cyber variety. According to Reuters:
There were clear limits to Friday’s deal. A White House statement said the two leaders agreed that neither government would knowingly support cyber theft of corporate secrets or business information. But the agreement stopped short of any promise to refrain from traditional government-to-government cyber spying for intelligence purposes. That could include the massive hack of the federal government’s personnel office this year that compromised the data of more than 20 million people. U.S. officials have traced that back to China, but have not said whether they believe the government was responsible.
Given the increasing complexity of the way cyber attacks are carried out and the challenges of attribution or “pinning” an information heist on one person or organization, perhaps the Chinese merely were placating the United States. In other words, the Chinese can say they will cease cyber economic espionage because verification of the true identity of the thief is nearly impossible. Thus, it is difficult to know exactly whether anything really has changed.
Furthermore, as reported by the FBI in April of 2016, the “FBI’s number of investigations into possible economic espionage on U.S. businesses has increased by 53% within the past year.” Although the list of Justice Department cases do not differentiate between cyber and in-person theft, the list of active criminal cases involving trade secret theft is sizable.
Going Public May Be the Law, but It Does Not Look Good
Sizing up the problem is further compounded by the fact that, although reporting requirements mandate the disclosure of events that have a material impact to a publicly traded company, there are strong disincentives to disclose a successful IP theft. Not only does such a theft raise questions about management not doing its job or IT leadership failing to keep the bad guys out, but it also tells other bad guys that your company has inadequate security and could invite further cyber attacks.
On December 18, 2015, the Cyber Information Sharing Act became law. The law was designed to create a voluntary cybersecurity information sharing process to encourage public and private entities to share cyber threat information while protecting classified information, intelligence sources, privacy, and more.
It remains to be seen whether the law will address the reluctance of companies to come forward.
The Law Cannot Really Solve the Problem
In-house lawyers play several roles that can help mitigate the effect of economic espionage on their individual company. From negotiating better security software agreements, to legally protecting IT, to aggressively going after IP thieves, lawyers increasingly play an important role. For the most part, however, lawmakers have been hamstrung in finding an effective legal solution to the theft of company trade secrets.
In this regard, it is important to differentiate between cyber economic espionage and in-person the