Transcripts For CSPAN Economic Espionage 20140519 : vimarsan

The the hearing will come to order. Im expecting that my Ranking Member will be here shortly. I just saw him on the cspan screen, so i know he is on the floor, and not here. I have permission from his staff to proceed. He will join us as soon as your schedule permits. I will recognize in the audience pagano. Ano ed we are having hearing today that entitled economic espionage and trade secret theft. Are our laws adequate for todays threats . Today, the subcommittee is going to explore how we can better better protect american businesses from those who try to steal their valuable intellectual property. American companies are renowned as being the most innovative in the world. Companies of every size and every industry, from manufacturing to software to biotechnology to aerospace own large portfolios of legally theycted trade secrets have developed and innovated. In some cases, the secret sauce may be the companys most valuable asset. The theft of these secrets can lead to devastating consequences. For small businesses, it can be a matter of life and death. Trade secret theft has been around as long as there have been secrets to protect. There is a reason why cocacola has kept its formula locked away in a vault for decades. In recent years, the methods haveto steal trade secrets become more sophisticated. Companies now must confront the reality that they are being attacked on a daily basis by cyber criminals who are determined to steal their intellectual property. As attorney general holder has observed, there are two kinds of companies in america. Those been hacked that have been hacked and those that do not know they have been hacked. Today, a criminal can steal all the trade secrets a company owns from thousands of miles away without the company ever noticing. Are of the cyberattacks we seeing are the work of foreign governments. China and other nations now routinely steal from american businesses. They give the secrets to their own companies. Their version of competition. Clear, we do not do the same to them. Were now going through a healthy debate in america about the scope of government surveillance, but there is no. Ispute about one thing our spy agencies do not steal from foreign businesses to help american industry. While cyberattacks are increasing, traditional threats remain. Company insiders can still walk off with trade secrets to sell to the highest bidder. Competitors still steal secrets through trickery or by breaking in to a factory or office building. It is impossible to determine the full extent of the loss to american businesses. Of the theft of trade secrets and other intellectual property. Our nation may lose anywhere from one to three percent of her gross to mystic product through tape through trade secret theft alone. The Defense Department has said amount of year an intellectual property larger than that contained in the library of congress is stolen from Computer Networks belonging to american businesses and government. Estimates of the value of ip stolen by foreign actors are as. Igh as 300 billion general keith alexander, until recently the head of nsa and Cyber Command at the pentagon, has characterized these that the divers have the cyber theft as the greatest transfer of wealth in history. Of course, we are on the losing end of it. But no estimate can fully capture an the real impact of trade secret theft. When other countries and foreign businesses dealer trade secrets, theyre stealing our ideas. Theyre stealing our innovation. Most importantly, theyre stealing our jobs. In my own state of rhode island, we continue to face unacceptably high unemployment despite having some of the most innovative businesses in the country. If we do not protect our businesses from those who steal their intellectual properties, and were letting that innovation going to waste, and were letting american jobs go overseas. In the past, some companies were reluctant to talk about this issue because no one likes to admit that they have been victimized. But many are now coming forward to speak out because they recognize how important it is that we Work Together to address this common thread. Threat. I want to thank the representatives who are appearing before us today in the second panel as well as many withs who work closely other senators on this issue. That theraged ministers lester released a blueprints for a strategy to trade secrecy theft. An agency of the government is increasing efforts to address this problem. The Administration Must recognize that the theft of intellectual property is one of the most important foreignpolicy challenges we face. It must communicate to china and other nations that stealing from our businesses to help their businesses is unacceptable. E in Congress Must do our part we need to make sure that our criminal laws are adequate and uptodate. Last fall, senator graham and i released a discussion draft of legislation designed to clarify that statesponsored overseas hacking could be prosecuted as , and to espionage strengthen criminal protection of trade secrets. Able commentsll and suggestions about this legislation. We look forward to hearing from our Witnesses Today about how to improve our laws and what we can do to help defend our industries. We hope to introduce our legislation in the coming weeks. Also need civil remedies for those who steal from them. There is currently no federal law that allows companies themselves to seek civil remedies against those who steal from them. Haveors kunz and hatch recently introduced legislation to give victims of trade secret theft the option of pursuing thieves in federal court. Senator flake has also introduced legislation to give companies a federal civil remedy for trade secret theft. I hope that the Judiciary Committee will act soon on legislation to strengthen both the criminal and civil protections against trade secret theft. I look forward to working with both legs toward that goal. Colleagues toward that goal. What hope will be clear by the end of this hearing is that we to thisall in approach hearing. We must strengthen our criminal and our Law Enforcement agencies must prioritize trade secret that before it occurs. Investigating and prosecuting when it does occur. I will add that there remains an urgent need for us to pass broader Cyber Security legislation. I appreciate working with senator graham on that effort. I look forward to hearing from our Witnesses Today and to working with my colleagues on both sides of the aisle to address this critical issue. Is randall cness coleman, the assistant director of the tanner Intelligence Division at the federal bureau of investigation. Coleman is responsible for ensuring that the fbi carries out its mission to defeat foreign intelligence threats. Mr. Coleman began his career as a special agent with the fbi in 1997, and has previously served as assistant special agent in charge of the san antonio division, chief of the counterespionage section and special agent in charge of the little rock division. Ride to his appointment to the fbi, mr. Coleman served as an officer in the United States army for nine years. We are delighted that he could themus today, and we ask to proceed with his testimony. Proceed, sir. Pleased to be here with you today to combat economic espionage and theft of trade secrets. The object considers investigation of theft of trade and and is it economic espionage a top priority. In 2012 alone, the National Counterintelligence executive a lossed estimated approaching 400 billion. To foreign adversaries and competitors who, by legally obtaining a broad range of trade secrets, degraded our nations advantage in Innovative Research and development in the global market. This immense loss threatens the security of our economy in preventing and preventing such loss prevents vigilance. The fbi is diligently working to apprehend targets against u. S. Businesses, academic institutions, clear defense contractors and government agencies. It has made significant progress including some of the most egregious offenders behind bars. Economic espionage and trade secrets and theft of trade secrets are growing trend of cyber enabled trade secret theft. The Insider Threat employee may be stealing information for personal gain or serving as a spy to benefit other oranizations are country country. Fbi, however, cannot protect a nations economy by acting alone. The counterIntelligence Division oversees a network of more than 80 special agents that are serving a Strategic Program workinators who handinhand with industry and academic institutions across country. Partnership cornet is conducted in person classified and unclassified threat presentations and briefings. It serves as an early referral mechanism for reports of possible economic espionage, and theft and trade secrets and cyber intrusions. Working through the more than 15,000 contacts nationwide, this Program Helps companies detect, deter, and defend against attacks. Takes seriously its role to investigate and apprehend targets pursuing economic espionage. By forming close partnerships with local, logical businesses and act yet get wishes to have a greater impact on preventing and deterring the loss of trade secrets before any loss can actually occur. For theu again opportunity to testify. I look forward to answering any of your questions, sir. I like to talk with you about a couple of things. First of all, have you any specific reaction to the draft legislation that senator graham and i circulated for discussion . Legislation that allows fbi to have a better advantage at going after our foreign adversary adversaries as relates to economic espionage, the fbi is in favor of it. Click reasonably, the people we working with the department of justice, the support the arguments and points are making . Yes sir, absolutely. One of the things that i have observed, having watches for a while, is that whenever you hear about the case is brought foreign intellectual property theft, in every case that i have found, so far there has been some nexus to oldfashioned intellectual property theft. Somebody taking the dvd home, somebody taking the patented item out of the factory. We have seen an explosion in pure cyber intrusions. Extraction through the Cyber Network of intellectual property with no other technique involved. To my knowledge, there have been no charges brought ever against anyone for that kind of activity. I do stand that these cases are very complicated very to understand that they have huge forensic issues, that there is an overlay with National Security with the intelligence requires a lot of effort. I understand that some of the targets are overseas, that creates a whole other array of legal issues. Trust me, having served as a United States attorney, i can see how very challenging these cases are to make. Whenever general alexander saying that we are on the loses on the losing end of one of the biggest transfers of wealth in human history, we would like to see a little more actual heart prosecution activity. What you think is behind that difficulty and is anything we can do . Is adjusted resource question. What can we do in congress to put some points on the board against these people, and criminal law courts . Chairman, i think you. Escribed it to a t obviously, when he got the borders of the United States, and many of these investigations have a four nexus, our ability to conduct effective investigations is diminished greatly. I will tell you that we do have ongoing investigations that i would foresee as having a logical conclusion that i think you would agree, as you iscribe, in fact, the fbi has actually play cyber assets and resources working with the counterintelligence Resources International Cyber Intrusion Task force working hand in hand and shoulder to shoulder on these specific investigations. So, i think technology plays a Critical Role in the advancement makes the threat that much more complicated. I think there has been tremendous progress made by the fbi along with their partners at investigating these type of crimes. Andopeful as we go forward we will be a will to demonstrate that we have an effective and will be effective in this arena. I would want to suggest that the fbi have not been effect if. Ive been out to the mci gtf and have seen what you do out there. And had to take my concern turn it into a single phrase, it wouldnt be the fbi is not effective. It would be the guy so busy trend keep track of whos coming through the doors and windows and trying to warn other companies that their hacking into, that there simply is a resource constrained in terms of taking all that effort which could be devoted to tracking all these attacks and trying to help our businesses. There just isnt the capability or enough capability to sit down and go through putting a prosecution practice together, working up to the intelligence agencies and doing all the steps that need to be done. In many ways, im trying to enjoy a friendly question, saying let us help you do what needs be done in terms of the resources. I would want to take anybody off of what theyre doing that mci gtf to put a prosecution practice together. At some point, we have to have a robust enough responses a country that we are starting to, for want of a better example, indict chinese colonels and generals who are behind pulling this kind of thievery off. Of whatnk another part is important is, and you describe it as a threat is so immense, that that is what makes his outreach efforts are important what we are doing. In the private sector and academic institutions to work handinhand with us so we can actually try to get out in front of this threat. Youre absolutely right. The threat is so immense that the fbi cannot take this on alone. Whatever necessary help we can get in those other industries and sectors is of great help to us. In the lastrovision appropriations bill that requires the department of us. Ice to do a report for looking forward, looking out a couple years and thinking about what the structure should be like for dressing this particular threat. It has exploded, as you know. Expose even further every year it explodes even further every year at massive levels. This pointvinced at that the present set up makes sense. If you look at another area that whatded, if you look at happened when aviation began and what its effect was on the conduct of warfare, you started effort as subair heart of the signal corps. Then it became a subpart of the really untilasnt after world war ii that your article on u. S. Air force. A veryhen, we have been successful leader in that theater of military operations. Until then, we really werent set up right. Im not convinced that we are set up right. I would invite you to comment on this, but let me also ask this question for the record that you can take back to headquarters. How does it make sense to have these kinds of cases, perhaps in your counterintelligence perhaps in the cyber division, perhaps in the criminal division, how do you sort amongst those three divisions to have this the efficient and smooth flowing . As a understand it, each of those different sections has a piece of this. I think the first part of your comment is, are we structured right . Basis. At this on a daily it is certainly a priority for our director as to look at our we efficiently and effectively addressing the threats. Ill tell you, the counterIntelligence Division, espionage is a priority. We are always looking for better ways to address this. Some of the more significant effort we have made is to really have an outreach. I cant stress how important that is to this process and what benefits we have seen from that. We have expanded our contacts across the country to 15,000 contacts. The conduct of over 7800 presentations and briefings a year. See thetarting to majority of these relationships is starting to pay off. The fact that companies are starting to come to us, academic institutions are actually coming to us early on and calling that context we can get engaged in the problem at the very early. Hasus after a bad actor left the company with your two terabytes of information. That is a victory for us in the process, but theres a lot of room for improvement that we will continue to do. We are always looking at ways to improve that. If you can take is a question for the record and get an official response from your organization, im interested in whether you think five years out or 10 years out that similar division across all the separate parts of the bureau will continue to be a wise allocation or whether we are in a sort of a transient step towards what ultimately will be the way we address is. Thank you for your service. I know this is an immensely challenging area that calls on all sorts of different resources. Im proud of the way a guy conducts itself in this area and i appreciate your service to our country. Mr. Chairman, thank you for having us today. Will take a twominute recess while the next panel gets itself sorted out. We will come back into action then. [indiscernible] all rise, the hearing will come back to order. Forank the witnesses attending and participating in this hearing. We have a terrific panel of witnesses. I am delighted that you are all here. This is very promising. Is a Vice President of intellectual Property Management for the boeing company, which is plenty of intellectual property to manage. He has worked there since 1984 in his current role he manages companies patent portfolio, protection of its trade secrets, and licensing of technical data images, consumerproducts trademarks and patents. To hiso being appointed current position, mr. Hoffman served as the director of Global Research and Development Strategy for boeing research and technology. Is the companys advanced research organization. E welcome him why dont you get your statement and i will produce and take the statement of each witness. We will open up for questions after that. Proceed, mr. Hoffman. Good afternoon, chairman wh