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