Trade Secret Theft, Industrial Espionage, and the China Threat

310 Pages·2013·8.13 MB·English

by  Carl Roper

Trade Secret Theft,
Industrial Espionage,
and the
China
Threat
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Trade Secret Theft,
Industrial Espionage,
and the
China
Threat
Carl Roper
CRC Press
Taylor & Francis Group
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Contents
About the Author ..............................................................................................................................xi
Introduction ....................................................................................................................................xiii
Chapter 1 China: The Red Dragon of Economic Espionage ........................................................1
Protecting US Intellectual Property Overseas .............................................................7
Background of the Problem ..........................................................................................7
London Speaks Out ....................................................................................................12
What Does China Desire to Be?.................................................................................12
The US Stand on the Nation’s Economy ....................................................................13
China’s Industrial Espionage ......................................................................................14
Project 863 ..................................................................................................................14
Guidance Projects ......................................................................................................16
National High-Tech R&D Program ............................................................................16
Getting the Data ....................................................................................................17
Economic Collection and Industrial Espionage ....................................................17
A US View—Background of the Problem .................................................................18
References ..................................................................................................................20
Chapter 2 We Are Not Alone: Economic Espionage and the World ..........................................23
Examples of Attempts to Obtain Economic Information ..........................................28
Renewed Focus on China ...........................................................................................31
References ..................................................................................................................31
Chapter 3 The Background of Economic Espionage ..................................................................33
Espionage as a Means of Nation Building .................................................................34
History ........................................................................................................................35
References ..................................................................................................................38
Chapter 4 PRC Acquisition of US Technology: An Overview and Short History ......................41
The PRC Government Structure ................................................................................42
COSTIND: The CCP’s Use of Corporations for Military Aims ...........................43
CCP Supremacy over the State, the PLA, and the Economy .....................................43
Development of the CCP’s Technology Policies ........................................................44
The 863 and Super 863 Programs: Importing Technologies for Military Use ..........45
The 16-Character Policy: “Give Priority to Military Products” ................................46
The PRC’s Use of Intelligence Services to Acquire US Military Technology ..........49
Overview of Methods Used by the PRC to Acquire Advanced US Military
Technology .................................................................................................................50
Acquisition of Military Technology from Other Governments .................................51
Joint Ventures with US Companies ............................................................................52
Acquisition and Exploitation of Dual-Use Technologies ...........................................54
Front Companies ........................................................................................................55
v
vi Contents
Direct Collection of Technology by Non-Intelligence Agencies and Individuals .....57
Illegal Export of Military Technology Purchased in the United States .....................59
PRC Incentives for US Companies to Advocate Relaxation of Export Controls .......60
China’s Efforts to Assimilate Advanced US Military Technology ............................60
Chapter 5 Chinese Product Piracy and Counterfeiting ...............................................................63
The Film Industry and Pirated DVDs ........................................................................65
China’s Loose IP Protection Concerns.......................................................................66
IP Theft.......................................................................................................................67
IP Rights .....................................................................................................................68
The Plight of the Copyright Industries due to Piracy in China ..................................68
The Business Software Industry ............................................................................68
The Motion Picture Industry .................................................................................69
The Entertainment Software Industry ...................................................................69
The Book Publishing Industry ..............................................................................70
The Recording Industry .........................................................................................70
Congressional Hearings on Chinese Piracy ..........................................................71
Breadth of the Counterfeiting Problem .................................................................72
Chapter 6 Who, What, and How China Targets .........................................................................73
Targeted Information and Technologies .....................................................................74
Methods Used to Conduct Such Espionage ................................................................75
Other Economic Collection Methods .........................................................................77
Other Economic Collection Efforts............................................................................85
Case Study of a Chinese Collector .............................................................................87
Other Interesting Cases of Chinese Espionage ..........................................................87
Case 1 ....................................................................................................................87
Case 2 ....................................................................................................................88
Case 3 ....................................................................................................................88
Case 4 ....................................................................................................................88
Case 5 ....................................................................................................................88
References ..................................................................................................................88
Chapter 7 The China Spy Guide and Open-Source Information ................................................89
Chinese Intelligence Operations ................................................................................91
Chinese Intelligence Collection Organizations ..........................................................91
Chinese Collection Operations ..............................................................................92
Chinese Intelligence Collection Trends .................................................................94
Open-Source Collection .............................................................................................94
Benefits of Open-Source Information Collection ..................................................95
The Changing Nature of Open-Source Information .............................................96
Traditional Open-Source Assets ............................................................................96
Electronic Databases .............................................................................................97
Commercial Imagery .............................................................................................98
Closing Comments .....................................................................................................98
References ..................................................................................................................99
Contents vii
Chapter 8 The Intelligence Cycle and Collection Effort ..........................................................101
Defining Intelligence ................................................................................................102
Collection Disciplines ..............................................................................................104
HUMINT .............................................................................................................105
SIGINT ................................................................................................................107
MASINT ..............................................................................................................107
IMINT .................................................................................................................108
OSINT .................................................................................................................109
Computer Intrusion for Collection Operations .........................................................110
Chapter 9 Corporate Rivals ......................................................................................................111
Nature of the Information ........................................................................................116
References ................................................................................................................119
Chapter 10 Sources of Information .............................................................................................121
Open Sources of Information ...................................................................................122
Classified Government Information .........................................................................134
Paper Shredding .......................................................................................................135
The Direction of the Collection Effort .....................................................................137
References ................................................................................................................141
Chapter 11 The Economic Espionage Act ..................................................................................143
Overview of the EEA of 1996 ..................................................................................144
Elements Common to 18 U.S.C. §§ 1831, 1832 ........................................................145
Specification of Trade Secrets ..................................................................................145
Disclosure Effects of a Trade Secret ........................................................................146
Common Issues and Challenges in Trade Secret and EEA Cases ...........................148
Primary Objectives ..............................................................................................149
Three Parts to Trade Secrets ...............................................................................149
Intellectual Property Cases .................................................................................150
References ................................................................................................................151
Chapter 12 The U.S. Response to Economic Espionage.............................................................153
US Government Awareness ......................................................................................153
NACIC Background and the Change to the Office of the NCIX .............................154
An Expanded Outreach to the Private Sector ..........................................................155
No Electronic Theft Act ...........................................................................................155
Militarily Critical Technologies List ........................................................................160
Espionage and Illicit Acquisition of Proprietary Information .................................162
Policy Functions and Operational Roles ..................................................................162
US Government Support to Private Industry ...........................................................164
Options for Consideration ........................................................................................167
CI Community Efforts to Protect Technology .........................................................169
References ................................................................................................................172
viii Contents
Chapter 13 The DOD View of IP Theft: A Trend Analysis of Reporting on Foreign
Targeting of US Technologies ..................................................................................173
Background ..............................................................................................................174
Threat Entities ..........................................................................................................175
DSS Key Findings ....................................................................................................177
Targeted Technology Concerns ................................................................................178
Overall DOD Concerns: A Summary ......................................................................180
References ................................................................................................................182
Chapter 14 Intellectual Property Rights: Patents, Copyrights, and Trade Secrets .....................183
Patents ......................................................................................................................184
Types of Patents ........................................................................................................184
Trademark and Service Marks .................................................................................186
US Trademark Act and Trade Dress ....................................................................187
Copyright ..................................................................................................................188
What Does a Copyright Protect? .........................................................................189
Trade Secrets ............................................................................................................190
Trade Secret Protection ............................................................................................191
China’s IPR Enforcement System ............................................................................192
References ................................................................................................................194
Chapter 15 Internet Exploitation: The Web, Your Computer, Your IT System ..........................197
Federal Information Security Management Act.......................................................199
Sensitive US Internet Traffic Sent to Chinese Servers .............................................202
China’s Thinking and Capabilities in Cyberspace ...................................................203
The Deterrence Effect on the United States .............................................................204
References ................................................................................................................205
Chapter 16 Protecting Your Data ................................................................................................207
Espionage and Foreign Travel ..................................................................................209
Elicitation: What Is It? .............................................................................................212
Why Elicitation and What Is Its Appeal to Today’s Spy? ...................................213
Elicitation Response ............................................................................................214
Your Response .....................................................................................................214
Tips on Deflecting Elicitation Attempts ..............................................................215
Elicitation: An Intelligence Collector’s Viewpoint ..................................................215
Hosting Foreign Visitors ..........................................................................................216
Host Responsibilities ...........................................................................................217
Long-Term Foreign Visitors .....................................................................................218
The Technology Control Plan...................................................................................220
Security Reporting Responsibilities ....................................................................221
Espionage Indicators............................................................................................221
Protecting Your IP Rights (IPR) in China ...............................................................222
China’s Current IPR Environment ......................................................................222
The Best Protection Is Prevention .......................................................................223
China’s IPR Enforcement System........................................................................224
What the US Government Can Do in IPR Infringement Cases ..........................225
About Trade Secrets in China ..................................................................................225
Contents ix
Strategy Targeting Organized Piracy .......................................................................226
Getting Help to Protect Your Rights ........................................................................226
Your Knowledge of Methods Used in Economic Espionage ...................................226
Unsolicited Requests for Proprietary Information ..............................................227
Espionage Indicators ................................................................................................227
Inappropriate Conduct during Visits ...................................................................228
Suspicious Work Offers .......................................................................................228
Exploitation of Joint Ventures and Joint Research ..............................................228
Acquisitions of Technology and Companies .......................................................229
Co-Opting of Former Employees ........................................................................229
Targeting Cultural Commonalities ......................................................................229
The Bottom Line for Protecting against Threats .....................................................229
Security Precautions as a Business Enabler .............................................................230
References ................................................................................................................230
Chapter 17 Source Documents and Other Resources .................................................................233
Appendix A: The Dongfan “Gregg” Chung and Chi Mak Economic Espionage Cases .......245
Appendix B: Economic Espionage Killed the Company, The Four Pillars Enterprise Case .....255
Appendix C: Summary of Major US Export Enforcement, Economic Espionage, Trade
Secret, and Embargo-Related Criminal Cases, 2007 to the Present ......................................261
Appendix D: Special 301 Report, China ....................................................................................285
Index ..............................................................................................................................................295