ECONOMIC ESPIONAGE
UNCLASSIFIED
SABT Parker ShipleyProgram Coordinator
Milwaukee Field Office
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.
Partnership with public and private entities to protect the national and economic security of the United States through the exchange of information
STRATEGIC PARTNERSHIP PROGRAM
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
• Tangible:
• Intangible: No matter how stored or compiled:
• physically, electronically, graphically, photographically, or in writing.
No Matter What Form
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 ?
• Military• Government• Intelligence
Agencies• Big Defense
Contractors• Larger Cities
COLD WAR 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
“The strongest castle walls are not proof against a traitor within”
- Ancient Proverb
75% of reported cases
Targeted IP and TechnologyCivilian 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
Recruitment by foreign intelligence services
Liaison with universities that have ties to defense contractors
Exploiting Multi-National Conferences, Business exchanges or Joint Ventures
Visiting scientific and research delegations
Circumventing export control laws
Researchers and facilities relocated overseas
Source: National Counterintelligence Center Annual Report to Congress on Counterintelligence and Industrial Espionage
Victim Companies• L-3 Communications
• Coca Cola
• Bristol Myers
• Kraft Foods
• Gillette Company
• Deloitte & Touche
• Wilsonart Int’l
• Idexx Labs
• Sun Microsystems
• IBM
• Cleveland Clinic• Caterpillar• Motorola• Avery Dennison• PPG• Lucent Technology• Mastercard• 3M
Signs You are an IP Theft Victim1. 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 CompetitionSource: 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 threat1. 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