Congress Moves to Stop Spies in the Workplace If an Employee Sends Secrets to Beijing, FBI May Be Helpless

Article excerpt

IN 1994, an employee of Ellery Systems Inc., a small Colorado firm, allegedly stole proprietary software codes and sold them to China for $550,000. After uncovering the theft, company officials called the FBI, which arrested the employee and a number of co-conspirators. All of them confessed. Open and shut case, right?

Wrong.

Federal prosecutors dropped the case, while Ellery was forced to close because it had lost the trade secrets that had augured commercial success. In the click of a mouse, a competitor had obtained knowledge the firm had taken years to develop.

Ellery was a victim of a legal gap that federal officials say is costing US companies billions of dollars and thousands of jobs: There are no federal statutes that specifically outlaw the theft of ideas and innovations used to produce advanced technologies. US law is not keeping pace with technological change, they say.

The loophole has contributed to an explosion in economic espionage against the United States that officials view as a threat to national security and American domination of the huge global market in technologies ranging from computer chips to medical equipment.

Armed only with barely applicable laws on mail fraud and the transportation of stolen goods, federal prosecutors have been unable or unwilling to go after thieves working for foreign companies, hostile states, and friendly governments.

Current patent, copyright, and trademark laws are often ineffective because they do not cover the theft of such items as corporate sales strategies, the formulas or computer codes for products not yet patented, and blueprints for technologies still in development.

Efforts have now started in Washington to give law enforcers the tools they need for a crackdown. Senate Republicans have introduced at least three bills that would make economic espionage and the theft of intellectual property federal crimes. Joint hearings opened last month on the issue by the Senate Judiciary and Intelligence Committees are to resume once the Clinton administration introduces its own proposed legislation.

"If this statute were passed it would ... help our investigations immensely," says Robert Bryant, the head of the FBI's National Security Division. "What that will do is level the playing field.#"

A lack of industrial espionage laws has hamstrung hundreds of FBI investigations involving the intelligence services of at least 23 countries, says Mr. Bryant. About half those countries are unfriendly states and the rest are friends and close allies.

"Our investigations have gone up 800 percent since we started this issue basically in 1994," says Bryant. …