Good morning Mr. Chairman, Vice Chairman, and members of the Committee.Thank you for this opportunity to join my colleague in providing the FBI's perspective in this area of growing concern.

      As Mr. Gallagher has indicated, economic crimes have a serious impact on a wide variety of industries and businesses, and therefore upon the economic well-being of the United States.The ever increasing value of proprietary economic information in the global and domestic marketplaces, and the new uses for technology, have combined to enhance the opportunities and motives for conducting economic espionage.

      Foreign governments and major foreign industrial sectors play a prominent role in their nation's business intelligence collection efforts.While a Cold War military rival stole military secrets about a state-of-the-art weapon or defense system, today's economic rival steals proprietary business information or government trade strategies.As a result, the intelligence agencies of some governments conduct economic espionage.These governments actively target U.S. persons, firms, industries and the U.S. Government itself, to steal our critical technologies, patented formulae, and business plans on behalf of their own economies.

      Because trade secrets are an integral part of virtually every aspect of U.S. trade, commerce, and business, the security of trade secrets is essential to maintaining the health and competitiveness of critical segments of the U.S. economy.

      In 1994, the FBI established an economic counterintelligence program as part of our national security strategy.The passage of the Economic Espionage Act of 1996 has greatly assisted the FBI in its battle against those who conduct economic espionage.The Act resolved many gaps in federal criminal laws.It fundamentally modernized our criminal code by protecting intellectual property through strong new criminal sanctions.Principally, The Economic Espionage Act created two new felony crimes.The first of the two crimes [Title 18, United States Code, Section 1831] punishes any person or company that steals trade secrets on behalf of a foreign government or entity. Persons convicted under this law face a maximum 15 year sentence and up to $500,000 fine.For organizations the fine can range up to $10,000,000.

      The second crime, Section 1832, punishes the theft of trade secrets for simple criminal gain and does not require the intent to benefit a foreign entity.It carries a maximum 10 year jail term and up to a $500,000 fine for individuals and a $5,000,000 fine for organizations.

      Under the law, a trade secret is defined broadly as any proprietary information that is reasonably protected from public disclosure and that derives independent economic value from being a secret for the rightful possessor.Importantly, the Economic Espionage Act has a provision protecting the victim's trade secret from public disclosure throughout the entire court process.

      Prior to the passage of this Act, the FBI was already addressing hundreds of foreign counterintelligence investigative matters concerning hostile economic intelligence activities.That pace continues.The FBI has developed significant information on that foreign economic threat, to include:1) identification of the foreign government sponsors of economic espionage; 2) the economic targets of their intelligence and criminal activities; and 3) the methods used to clandestinely and illicitly steal U.S. Government information, trades secrets and technology.

      Additionally, the FBI has forged crucial partnerships with the Department of Defense, Department of Energy, and private industry to allow for prompt detection and successful investigative efforts in this area.

      A number of countries continue to pursue economic collection programs.Foreign economic collection focuses on Science and Technology, as well as Research and Development.Of particular interest to foreign collectors are dual-use technologies and proprietary economic information which provide high profitability.Proprietary business information, i.e., bid, contract, customer and strategy information, is aggressively targeted.Foreign collectors have also shown interest in government and corporate financial and trade data.

      Practitioners of economic espionage seldom use one method of collection, rather they have concerted collection programs which combine both legal and illegal, traditional and more innovative methods.Investigations have and continue to identify the various methods utilized by those engaged in economic espionage and to assess the scope of coordinated intelligence efforts against the United States.

      An intelligence collector's best source continues to be a mole, or "trusted person," inside a company or organization, whom the collector can task to provide proprietary or classified information.Recently, we have seen the international use of the Internet to contact and task insiders with access to corporate proprietary information.Other methodologies include the recruitment of foreign students, joint ventures, and the use of well-connected consultants to operate on behalf of a foreign government.

      In conclusion, the National Security Division must continue to address the ever present threat to intellectual property, trade secrets and other proprietary economic information.The evolution of the global community and of technology itself presents a rapidly changing arena in which the foreign threat to U.S. trade secrets is constantly lurking.The FBI's efforts to build key relationships with other executive departments and with private industry will be crucial in the successful counterintelligence efforts focussing on the economic collection activities of foreign entities.Thank you for your time and your support of this critical area of concern to the national security of the United States.