United States: U.S. Responding To Cyber-Espionage: White House Acknowledges Increasing Threat

No longer cut from the cloth of 007's expensive suits, fast cars or well-mixed drinks, present-day espionage is carried out, to a great extent, through computer screens, proxy servers and spoofed e-mail addresses. Dubbed cyber-espionage, this new wave of espionage includes unauthorized probing of a computer's configuration, unauthorized evaluation of a computer system's defenses or unauthorized viewing and copying of data files.1 Cyber-espionage is regarded by the highest levels of government as the biggest threat facing American business today, resulting from an unprecedented transfer of wealth due to the theft of valuable trade secrets, intellectual property and confidential business strategies.

A new White House strategy sets forth guidelines to protect U.S trade secrets from theft through cybersecurity breaches, the majority of which are thought to be led by the People's Republic of China and conducted by advanced threat actors referred to as an "advanced persistent threat" (APT).

On February 20, 2013, the White House announced their strategy to protect U.S. trade secrets from theft by "corporate and state-sponsored ... misappropriation."2 This strategy, which warns of the accelerating pace of economic espionage, and casts the theft of U.S. trade secrets in terms of national security, articulates five "strategy action items" designed to flesh out the role of government agencies in protecting the nation's intellectual property. These action items, summarized below, include diplomatic action, the promotion of industry best practices, enhancement of domestic law enforcement, improving domestic legislation, and increasing public awareness. The White House strategy was presented in a joint press conference that included U.S. Attorney General Eric Holder; U.S. Department of Commerce Deputy Secretary Rebecca Blank; Commander of the U.S. Cyber Command, General Keith Alexander; and U.S. Intellectual Property Enforcement Coordinator Victoria Espinel.

The strategy, which emphasizes the widespread costs of intellectual property theft, comes on the heels of an Executive Order issued by President Obama calling for the protection of critical infrastructure.3 In addition, on February 19, 2013, the computer security firm Mandiant released a much-publicized and controversial report, which provided detailed evidence of a highly organized and sophisticated hacking unit within China's People's Liberation Army (PLA), from which a large number of cyber attacks on U.S. corporations, networks, and government agencies have originated.4 The strategy itself lists 20 incidents of cyber espionage and thefts of intellectual property that have taken place since January 2009. Drawing attention to the seriousness of the problem, Attorney General Holder said that "[t]here are only two categories of companies affected by trade-secret theft: those that know they've been compromised and those that don't know it yet."

White House Strategy Action Items

1. Focus Diplomatic Efforts to Protect Trade Secrets Overseas

The Obama administration's first action item in their strategy is to work with the nation's trading partners to ensure that the theft of trade secrets remains a serious issue, and to apply diplomatic pressure to discourage these thefts before they occur. A multi-agency approach will be used to make clear to foreign governments "the importance the U.S. places on the protection of trade secrets and to press those governments to take action to reduce and resolve incidents of trade secret theft." In addition to diplomatic pressure, the strategy will use various trade policy tools to enforce against trade secret theft, and will seek the cooperation of international law enforcement agencies in this effort.

2. Promote Voluntary Best Practices by Private Industry to Protect Trade Secrets

This point of the strategy "encourages companies to consider and share with each other practices that can mitigate the risk of trade secret theft" in order to come up with a set of best practices to protect trade secrets. The administration recognizes, however, that not all approaches will work for every industry or company, and points out that these best practices are not intended to represent a minimum standard of protection.

3. Enhance Domestic Law Enforcement Operations

The White House strategy makes clear that the "investigation and prosecution of corporate and state sponsored trade secret theft [is] a top priority." The Federal Bureau of Investigation and the Department of Homeland Security will cooperate on these matters as necessary. The strategy also directs the Office of the Director of National Intelligence (ODNI) to coordinate discussions between the intelligence community and the private sector to focus on four main aspects of trade secret theft:

  • the number and identity of foreign governments involved in trade secret misappropriation
  • the industrial sectors and types of information and technology targeted by such espionage
  • the methods used to conduce such espionage, and
  • the dissemination, use, and associated impact of information lost in trade secret misappropriation.

The ODNI will also share threat warning and awareness information with the private sector where appropriate. Enforcement efforts will be further aided through cooperation of the Defense Security Service and Defense Intelligence Agency.

4. Improve Domestic Legislation

The strategy points out that President Obama signed two significant pieces of legislation into law: the Clarification Act and the Enhancement Act. The Clarification Act was enacted in response to the Second Circuit decision in United States v. Aleynikov,5 which overturned the conviction of a Goldman Sachs programmer who stole software source code before leaving for another company that developed competing software. The Second Circuit concluded that the code had not been placed in interstate or foreign commerce, and therefore there was no violation of the Economic Espionage Act (EEA). The Clarification Act amends the EEA to apply to any trade secret "that is related to a product or service used in or intended for use in interstate or foreign commerce."

The Enhancement Act increases the criminal penalties available under the EEA for economic espionage. The maximum prison term is increased from 15 to 20 years. The maximum fines for individuals have been increased from $500,000 to $5 million, and the maximum fines for corporations have been increased from $10 million to either $10 million or the treble value that the company derived from the violation, whichever is greater.

5. Public Awareness and Stakeholder Outreach

The strategy recognizes the importance of encouraging all stakeholders to increase their awareness of the problem of trade secret espionage, and creates a number of actions to continue education and outreach in this area.

The Mandiant 'APT1' Report

In a strategy deemed to counteract a dip in gross domestic product growth and a fear of falling into a business gap that could hurt China's economy both now and in the future, the Chinese government has reportedly been making a concerted effort to engage in extensive theft of economic secrets that can be put into use in China to compete against the U.S. economy. Consequently, experts in the field regard China as posing one of the most serious threats in the commission of espionage for gaining trade secrets. The Office of the National Counterintelligence Agency called Chinese actors "the world's most active and persistent perpetrators of economic espionage," in its report to Congress.6

While not overtly stating as much, the White House strategy clearly intends to put pressure on the Chinese government to stop its trade secret espionage activities. The role of China in multiple high-profile incidents of cyber espionage is made clear in the strategy, which catalogs attacks on multiple companies, including Google, Lockheed Martin, and RSA Security, all linked to China. In an unrelated report, the computer security company Mandiant released detailed forensic evidence of widespread cyber espionage activities originating from a Chinese army unit known as "PLA Unit 61398," which is estimated to be staffed by hundreds, and perhaps even thousands of professionals with proficiency in English. This report, the findings of which have been confirmed by U.S. intelligence officials, provides strong evidence that the majority of cyber attacks on U.S. corporations and government agencies have originated with this unit. Mandiant has indicated that these attacks, reportedly carried out using an infrastructure of over 1,000 servers, are both widespread and sophisticated, lasting anywhere from several months to several years, and involve such critical infrastructure as the electrical power grid, gas lines, and water lines.

The White House strategy observes the obvious diplomatic sensitivity of these allegations, and does not directly address efforts by the PLA. Further complicating matters, the United States has taken part in its own cyber-espionage, most notably the disruption of Iran's uranium enrichment program through the Stuxnet malware. While it is clear that the Obama administration is taking any threat to U.S. critical infrastructure and trade secrets very seriously, its approaches to this problem will likely involve as much diplomacy as technology.

Conclusion

It remains to be seen both how effective the White House strategy will prove to be in stemming the tide of intellectual property theft, as well as what effect it may have on U.S. companies and the general public. Open questions for businesses to consider include:

  • By creating a strong link between trade secrets and national security, will this strategy make open information sharing between government and private industry more difficult due to classification of certain data?
  • How will this approach affect potential mergers and acquisitions? Will due diligence require notice of all past (and ongoing) attacks, and will this information be made available through a central government source? How will insurers react to proposed voluntary best practices?

Endnotes

1. http://itlaw.wikia.com/wiki/Cyber_espionage.

2. Executive Office of the President of the United States, Administration Strategy on Mitigating the Theft of U.S. Trade Secrets, February 2013, available at http://www.whitehouse.gov/sites/default/files/omb/IPEC/admin_strategy_on_mitigating_the_theft_of_u.s._trade_secrets.pdf.

3. Sharon R. Klein and Jeffrey L. Vagle, Executive Order Begins Process of Strengthening Nation's Cybersecurity and Critical Infrastructure, Pepper Hamilton Client Alert, February 21, 2013, available at http://www.pepperlaw.com/publications_update.aspx?ArticleKey=2562.

4. APT1: Exposing One of China's Cyber Espionage Units, Mandiant Intelligence Center Report, February 19, 2013, available at http://intelreport.mandiant.com.

5. 676 F.3d 71 (2d Cir. 2012).

6. Jennifer Schlesinger, "Chinese Espionage on the Rise in US, Experts Warn" http://www.cnbc.com/id/48099539.

Walter B. Donaldson,II is Managing Director at Freeh Group International Solutions (FGIS).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Jeffrey Vagle
Odia Kagan
Walter Donaldson, II
Similar Articles
Relevancy Powered by MondaqAI
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions