Disruptive Technology Strike Force: First Prosecutions Demonstrate Difficulties in Charging Individuals with Economic Espionage

When the Departments of Justice and Commerce launched the Disruptive Technology Strike Force, they trained their sights on preventing foreign adversaries from obtaining critical advanced technologies. The Strike Force acted quickly, and the DOJ announced five criminal cases last month that it said reflected the strike force’s core mission – “keeping our country’s most sensitive technologies out of the world’s most dangerous hands.”

In two of those cases, the government charged former software engineers with stealing source code from U.S. technology companies, purportedly to benefit Chinese competitors.  Based on public announcements applauding the Strike Force’s actions in preventing the technology from falling into the hands of Chinese companies and the Chinese government, the cases seemed to involve economic espionage – the theft of trade secrets benefiting a foreign government, instrumentality, or agent.

However, neither case actually charged a violation of the federal economic espionage law (18 U.S.C. § 1831). Prosecutors charged the defendants instead with the theft of trade secrets for monetary gain, regardless of the ultimate beneficiary (18 U.S.C. § 1832).  These charging decisions demonstrate one of the greatest challenges in investigating and prosecuting economic espionage – being able to prove that the theft of trade secrets was intended to benefit a foreign government, instrumentality, or agent.  The result is that government cannot take advantage of the tougher criminal penalties, and the greater potential plea bargaining leverage, that an economic espionage charge provides.

The Strike Force Takes its First Enforcement Actions

In February, the Department of Justice and Department of Commerce announced that an interagency Disruptive Technology Strike Force would  “target illicit actors, strengthen supply chains and protect critical technological assets from being acquired or used by nation-state adversaries.”

“Today, autocrats seek tactical advantage through the acquisition, use, and abuse of America’s most innovative technology,” Deputy Attorney General Lisa O. Monaco said at the time. “They use it to enhance their military capabilities, support mass surveillance programs that enable human rights abuses and all together undermine our values.”

Ms. Monaco added that the task force would “strike back against adversaries trying to siphon off our most advanced technology, and to attack tomorrow’s national security threats today.”

Consistent with Ms. Monaco’s statements, a press release announcing the first charges stemming from the strike force’s work implied foreign governments were the ultimate beneficiary of the stolen trade secrets.

“These charges demonstrate the Justice Department’s commitment to preventing sensitive technology from falling into the hands of foreign adversaries, including Russia, China, and Iran,” the task force leader, Assistant Attorney General Matthew G. Olsen, said. FBI Counterintelligence Division Assistant Director Suzanne Turner said the charges “aren’t the only instances of foreign adversaries trying to steal our technology.”

What Prosecutors Did – and Did Not - Allege

Despite this rhetoric, none of the cases involved economic espionage charges. Two of the cases involved the less serious charge of theft of trade secrets – regardless of the ultimate beneficiary. Those cases allege the theft of trade secrets related to nuclear submarines, autonomous vehicles, and military aircraft to benefit the Chinese government and Chinese companies.  This purported link was not enough for the government to bring an economic espionage charge and thus seek the harsher criminal penalties that it provides compared to a theft of trade secrets charge. 

• In United States v. Li, the government alleged that, as part of a Chinese government program, defendant Liming Li provided services and technology to Chinese entities related to export-controlled and trade secret technology that he purportedly stole from his former employers.
  • Pursuant to a search warrant, the government seized numerous digital devices containing millions of files belonging to the defendant’s former employer, including documents containing the source code for those companies’ proprietary software. The government also seized files in a folder labeled “ChinaGovernment,” allegedly indicating the defendant’s efforts to participate in the Chinese government program.
  • The criminal complaint further alleged that the defendant planned to provide trade secret technology “to PRC business and government entities.”
• In United States v. Wang, the government charged Weibao Wang, a former software engineer at a global technology company, with six counts of theft or attempted theft of trade secrets.
  • Those charges related to large quantities of data he purportedly took before leaving the company.
  • While at the global technology company, the defendant designed and developed hardware and software for autonomous systems.

Why Does This Matter?

The prosecutors’ decisions not to bring economic espionage charges likely hinged on the lack of available evidence and witnesses required to prove the foreign nexus element under the law.  That includes foreign-based evidence and witness testimony that can only be obtained through formal requests under bilateral and multilateral treaties (if at all). Diplomatic concerns and/or the presence of classified information also may have affected the charging decision.

However, prosecutors were able to bring these cases for theft of trade secrets for economic advantage regardless of whether there is a foreign nexus, which carries lesser criminal penalties than economic espionage.  A conviction for economic espionage carries a maximum sentence of 15 years in prison as well as a $5 million individual fine / $10 million corporate fine. The penalties are lower for theft of trade secrets with no foreign nexus alleged – a maximum 10 years in prison plus a $250,000 individual fine / $5 million corporate fine.

Prosecutors also can bring related charges, under the International Emergency Economic Powers Act or Export Administration Regulations, Export Control Reform Act, Computer Fraud and Abuse Act, National Stolen Property Act, or the federal wire fraud statute, among others. 

What Does This Mean for Technology Companies Trying to Protect Their Trade Secrets?

The U.S. government plans to continue to aggressively pursue people who steal U.S. corporate technology.  Companies often commit many hours and dollars in assisting the government by providing documents, surveillance footage, and other evidence, along with making company employees available for interviews.  Such efforts may include attempts to provide evidence concerning the foreign nexus element of economic espionage.

But rather than be in a reactionary mode, technology companies – especially those involved in developing technology favored and/or envied by foreign governments and companies – should consider taking stock of the rising threats posed by those entrusted with access to or knowledge of trade secrets by:

• Assessing their compliance programs to ensure they address trade secret protection and associated legal, financial and reputational risks.
• Evaluating whether they are taking reasonable measures for maintaining confidentiality of trade secrets and preventing trade secret theft, including:
  • Assessing policies and procedures.
  • Imposing contractual obligations and due diligence requirements on vendors, suppliers and employees.
  • Implementing employee training, physical security and network security.
• Creating a proactive, holistic threat mitigation program, which may include appropriate monitoring of insiders’ behavior and background checks.