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Public Statements

Foreign and Economic Espionage Penalty Enhancement Act of 2012

Floor Speech

By:
Date:
Location: Washington, DC

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Mr. SMITH of Texas. Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I thank Ranking Member John Conyers, IP Subcommittee Chairman Bob Goodlatte, IP Subcommittee Ranking Member Mel Watt, and the other Members of the House from both sides of the aisle who joined as original cosponsors of this commonsense bill.

The Foreign and Economic Espionage Penalty Enhancement Act of 2012 focuses on one goal: to deter and punish criminals who target U.S. economic and security interests on behalf of foreign interests.

In 1975, tangible assets, such as real estate and equipment, made up 83 percent of the market value of S&P 500 companies. Intangible assets, which include trade secrets, proprietary data, source code, business processes, and marketing plans, constituted only 17 percent of these companies' market value.

By 2009, these percentages had nearly reversed. Tangible assets accounted for only 19 percent of S&P 500 companies' market value while their intangible assets had soared to 81 percent. In a dynamic and globally connected information economy, the protection of intangible assets is vital not only to the success of individual enterprises but also to the future of entire industries.

A global study released last year by McAfee, the world's largest security technology company, and Science Applications International Corporation concluded that corporate trade secrets and other sensitive intellectual capital are the newest ``currency'' of cybercriminals. The study found the motivation for such crimes in the cyber underground is almost always financial. In recent years, cybercriminals have shifted from targeting the theft of personal information, such as credit cards and Social Security numbers, to the theft of corporate intellectual capital. Corporate intellectual capital is vulnerable, of great value to competitors and foreign governments, and its theft is not always discovered by victims.

Our intelligence community warns that foreign interests place a high priority on acquiring sensitive U.S. economic information and technologies. Targets include information and communications technologies, business information, military technologies, and rapidly growing civilian and dual-use technologies, such as those that relate to clean energy, health care, and pharmaceuticals.

We know that certain actors intentionally seek out U.S. information and trade secrets. The most recent report from the Office of the National Counterintelligence Executive identified Chinese actors as ``the world's most active and persistent perpetrators of economic espionage.'' The report also described Russia's intelligence services as responsible for ``conducting a range of activities to collect economic information and technology from U.S. targets.'' Of seven Economic Espionage Act cases resolved in fiscal year 2010, six involved links to China. Five companies were accused of the theft of trade secrets earlier this year. Four are Chinese state-owned enterprises or subsidiaries.

In the U.S., the EEA serves as the primary tool the Federal Government uses to protect secret, valuable commercial information from theft. The EEA addresses two types of trade secret theft. Section 1831 punishes the theft of a trade secret to benefit a foreign entity. Section 1832 punishes the commercial theft of trade secrets carried out for economic advantage whether or not the theft benefits a foreign entity.

Since enacting the EEA in 1996, Congress has not adjusted its penalties to take into account the increasing importance of intellectual property to the economic and national security of the U.S. The bill increases the maximum penalties for an individual convicted of committing espionage on behalf of a foreign entity. Currently, the maximum penalty for someone convicted under section 1831 of the EEA is 15 years imprisonment and a fine of up to $500,000. This bill increases the maximum penalty to 20 years imprisonment and a fine of up to $5 million. Earlier this year, the FBI estimated that U.S. companies had lost $13 billion to trade secret theft in just over 6 months. Over the past 6 years, losses to individual U.S. companies have ranged from $20 million to as much as $1 billion.

Our intelligence community has recognized a ``significant and growing threat to our Nation's prosperity and security'' posed by criminals, both inside and outside our borders, who commit espionage. Congress should also recognize this increasing threat and enhance deterrence and more aggressively punish those criminals who knowingly target U.S. companies for espionage.

So I urge my colleagues to support H.R. 6029, which was unanimously reported by the Judiciary Committee this month.

I reserve the balance of my time.

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