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?
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
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
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
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. …