Analysis of the Economic Espionage Act

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The Economic Espionage Act was enacted during a turbulent time in American history. The decades-long Cold War with the Soviet Union had finally ended. This led American congressman to believe the nation vulnerable to attack as they realized that the dawn of computers had transformed foreign espionage. In addition to advances in computer technology, the intrinsic value of intangible assets increased substantially, making it easier and more profitable to steal information than ever previously possible. Foreign spies were no longer a casualty of war and began infiltrating American businesses to attain trade secrets of American companies and weaken the economy of the United States at-large. In an effort to protect its citizens and businesses, America enacted the Economic Espionage Act of 1996. This act criminalizes trade secret theft intended to benefit foreign governments. The legislative history reveals that Congress grew increasingly worried about foreign threats to the American economy prior to the passage of the Economic Espionage Act. (Kuntz, 2013) During the discussion process, Federal Bureau of Investigation director Louis Freeh testified that the FBI was currently investigating individuals and organizations from 23 countries thought to be engaging in economic espionage against the United States. Many countries investigated included countries with whom Americans considered an ally or were on friendly terms. The Senate Intelligence Committee also reported that efforts by foreign governments to obtain trade secrets from American businesses caused more than $100 billion in losses and damages. Before the 1996 Economic Espionage Act, there was no federal crime statute that directly addressed foreign economic espionage or domestic trade theft. Without a specific statute, a combination of legislation was used: the Depression-era Interstate Transportation of Stolen Property Act, the Mail Fraud statute, and the Wire Fraud statute. These statutes were limiting and did not address economic espionage, as the Mail Fraud statute only applied to mail and the Wire Fraud statute applied to television or radio.

As previously noted, prior to the Economic Espionage Act, no legislation existed that fully encompassed the criminalization of economic espionage. Instead, the government relied on inconclusive statutes to protect its economic assets. However, because there was no federal centralized act to combat economic espionage, American legislatures felt that the American economy was vulnerable to intrusion especially since computer technology had advanced and the Cold War had ended. The greatest strength the Economic Espionage Act created was centralizing the criminalization of the economic espionage (Kuntz, 2013). As of 2000, a mere 4 years after its creation, the United States government had already prosecuted eighteen cases under the Economic Espionage Act. Companies harmed by the acts of economic espionage include Caterpillar, Gillette, IBM and many other American companies. Furthermore, these companies were often wronged by their own employees. The employees used computer technology, such as email, to disperse the company secrets they had acquired (Carr, Morton, & Furniss, 2000). For instance, in the Caterpillar case, Jack Shearer allegedly paid three employees $100,000 to steal blueprints for an oil pipeline. He instructed his employees to remove the ownership label the original owner had stamped on them. He then used those plans to create his own $8 million business. (Carr, Morton, & Furniss, 2000) Without the Economic Espionage Act, this case and the 17 others that were prosecuted after only 4 years of its enactment would not have been possible. The protection of millions of dollars and much intellectual property by the Economic Espionage Act are undeniably important results of the law’s passage.

Although the Economic Espionage Act has allowed the United States government to enforce protection for its economy and businesses, many critics claim that it has largely failed its intended purpose. Between 2011 and 2012, the economic losses in the U.S. due to economic espionage were greater than $13 billion (Kuntz, 2013). While the Department of Justice has heard several cases, the sanctions for those who engage in economic espionage are currently quite insubstantial. For example, in one case, the trade secret at issue was worth enough to the defendant that he offered to pay a restitution fee of $400,000 to settle out of court. However, the Department of Justice refused and instead gave him a fine of $10,000 and 2 years probation. In another case, the accused was sentenced to 6 months at home and a fee of $250,000. An additional case valued the trade secret at $20 million, yet the defendant was issued only 15 months jail time and 3 years probation. The majority of the cases seemed to be clear-cut. The FBI completed sting operations where an impressive amount of evidence was gathered against the economic espionage conspirators. The defense had little room for argument. However, minimal punishment was sought (Carr, Morton, & Furniss, 2000). These fees, along with minimal jail and probation time, are less significant penalties than a convicted small-time drug distributor would face. The amount of damage and funds involved in these cases is substantial, yet the punishment sought under the Economic Espionage Act is insignificant and certainly would not deter others from committing acts of economic espionage as the gains would greatly outweigh the losses of being caught and facing punishment. Additionally, should a company, rather than an individual, commit an act of economic espionage by stealing information intended to be used for its own personal gain, the Economic Espionage Act does little in the way of determining how a company should be prosecuted (Carr, Morton, & Furniss, 2000) Another disappointing fact is that the United States has yet to pursue any foreign economic espionage conspirators, despite the initial intention of the Congressional creators of the Economic Espionage Act in 1996. After ending the Cold War, the United States government feared that the onset of computer technology and the boom of American innovation would entice foreigners to enter the United States and steal important American trade secrets, thus the Economic Espionage Act was created. Perhaps foreign involvement was just an oversight, but domestic instigators have proved to be much more of a hindrance to American economic protection than initially thought, in many cases leaving foreign conspirators either completely to their own devices.

The Economic Espionage Act has room for great improvement if only to administer the original intent of the act. In 1996, the United States Congress desired to protect the American Economy and business structures by protecting trade secrets and company property from illegal and unfair use. However, the desired effect has not been achieved. While the Department of Justice has heard many cases of economic espionage, the sanctions it has administered certainly do little to deter the criminal actions. In many cases, it would be economically advantageous to commit economic espionage against the company one was employed for great personal gain. Should the conspirator be caught, the punishment would be minimal compared to the information and financial gain the crime allotted. Currently, there is little incentive to not commit the act of economic espionage, especially for a foreigner. By the mid-2000s, the United States had prosecuted no foreign economic spies, despite the Economic Espionage’s original intention to protect American soil from foreign economic invaders. As recent as 2012, the United States had lost more than $13 billion in trade secrets and economic espionage. Thirteen billion in losses is unacceptable. The Act must be revised and harder sanctions against criminals must be enacted to protect American business and the American economy. Failure to do so could lead to businesses and great business minds exiting the country in search of a safer environment to work. Should businesses exit, the American economy would be further weakened, the very antithesis of the original intent of the Economic Espionage Act.

References

Carr, C., Morton, J., & Furniss, J. (2000). The Economic Espionage Act: Bear trap or mousetrap? Texas Intellectual Property Law Journal, 8(2), 159-209.

Kuntz, R. L. (2013). How not to catch a thief: why the Economic Espionage Act fails to protect American trade secrets. Berkeley Technology Law Journal, 28, 901-933.