Obama to Pressure Countries to Stop Trade Secret Theft

U.S. officials said they will put diplomatic pressure on countries implicated in thefts of trade secrets and seek stronger international enforcement of intellectual-property protections.

President Barack Obama’s administration pledged to share more intelligence with companies about the nations involved in economic espionage and methods used to steal corporate information, and to study the need for stronger U.S. laws against trade-secret theft.

“We will act vigorously to combat the theft of U.S. trade secrets that could be used by foreign companies or by foreign governments to gain an unfair economic edge,” Victoria Espinel, the U.S. intellectual property enforcement coordinator, told reporters today. “It will be very clear to those countries that this is a top priority for the United States.”

The administration’s announcement comes a day after the computer-security firm Mandiant Corp. said in a report that the Chinese army is probably the source of hacking attacks against at least 141 companies worldwide since 2006.

The trade-secret strategy looks at more than computer-based theft. In a report today, the administration said the pace of economic espionage is accelerating through recruitment of current and former employees of companies, as well as cyber intrusions against U.S. businesses, law firms, universities and financial institutions.

Economic Jeopardy

While it doesn’t single out China, today’s report cites examples of economic espionage in which corporate secrets were passed to Chinese institutions.

“Trade secret theft threatens American businesses, undermines national security, and places the security of the U.S. economy in jeopardy,” according to the document. “These acts also diminish U.S. export prospects around the globe and put American jobs at risk.”

The administration will intensify efforts to apply diplomatic pressure on countries “where there are regular incidents of trade secret theft” and press them to strengthen enforcement action, according to the strategy document. In trade negotiations, the U.S. will seek agreements for other countries to provide protections for corporate secrets similar to those in U.S. law.

Espionage, Technology

The Director of National Intelligence will oversee increased sharing of U.S. intelligence on trade-secret theft with the private sector, including information on foreign governments involved in espionage and the types of technology targeted, the document says.

The administration will promote voluntary industry best practices on protecting intellectual property, and the Federal Bureau of Investigation is expanding efforts to fight computer intrusions involving trade-secret theft, according to the administration’s strategy.

“As new technologies have torn down traditional barriers to international business and global commerce, they’ve also made it easier for criminals to steal trade secrets and to do so from anywhere in the world,” U.S. Attorney General Eric Holder said.

“A hacker in China can acquire source code from a software company in Virginia without leaving his or her desk,” Holder said. “With a few keystrokes, a terminated or simply unhappy employee from a defense contractor can misappropriate designs, processes and formulas worth billions of dollars.”

‘Government Sponsored’

Cyber espionage is invisible, making it difficult for government to combat, James Garland, a partner at Covington & Burling LLP in Washington and a former Justice Department official under Holder, said in an interview.

“The fact that our government is talking openly about this is a good sign that the administration is raising the temperature on this, especially with China,” Garland said.

The Mandiant report released yesterday said computer intrusions from China, mainly directed at U.S. companies, were carried out by a group “likely government sponsored” and similar “in its mission, capabilities, and resources” to a unit of the People’s Liberation Army.

A spokesman for China’s Foreign Ministry, Hong Lei, denied any military involvement and said his department is opposed to computer hacking and has been a victim of attacks itself.

Obama issued an executive order Feb. 12 calling for increased government sharing of information on cyber threats with industry. It directs the government to develop voluntary cybersecurity standards for companies operating vital infrastructure such as power grids and air-traffic control systems.

A recently prepared U.S. secret intelligence assessment, described Feb. 11 in the Washington Post, said the country’s economy is endangered by a massive and prolonged computer- espionage campaign from China.

To contact the reporters on this story: Eric Engleman in Washington at eengleman1@bloomberg.net; Roger Runningen in Washington at rrunningen@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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