Calendar No. 546

104TH CONGRESS

2D SESSION S. 1556

A BILL

To prohibit economic espionage, to provide for the

and for other purposes.information in interstate and foreign commerce,protection of United States proprietary economic

JULY 30, 1996

Reported with an amendment
II

Calendar No. 546

104TH CONGRESS

2D SESSION S. 1556

To prohibit economic espionage, to provide for the protection of United

States proprietary economic information in interstate and foreign commerce, and for other purposes.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 1, 1996

Mr. KOHL (for himself and Mr. SPECTER) introduced the following bill; which

was read twice and referred to the Committee on the Judiciary

JULY 30, 1996

Reported by Mr. HATCH, with an amendment

[Strike out all after the enacting clause and insert the part printed in italic]

A BILL

To prohibit economic espionage, to provide for the protection

of United States proprietary economic information in

interstate and foreign commerce, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Industrial Espionage

5 Act of 1996’’.
2

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1 SEC. 2. FINDINGS AND PURPOSES.

2 (a) FINDINGS.—Congress finds that—

3 (1) sustaining a healthy and competitive na4 tional economy is imperative;

5 (2) the development and production of propri6 etary economic information involves every aspect of

7 interstate commerce and business;

8 (3) the development, production, protection,

9 and lawful exchange, sale, and transfer of propri10 etary economic information is essential to maintain11 ing the health and competitiveness of interstate com12 merce and the national economy;

13 (4) much proprietary economic information

14 moves in interstate and foreign commerce and pro15 prietary economic information that does not move in

16 interstate or foreign commerce directly and substan17 tially affects proprietary economic information that

18 does;

19 (5) the theft, wrongful destruction or alteration,

20 misappropriation, and wrongful conversion of propri21 etary economic information substantially affects and

22 harms interstate commerce, costing United States

23 firms, businesses, industries, and consumers millions

24 of dollars each year; and

25 (6) enforcement of existing State laws protect26 ing proprietary economic information is frustrated
3

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1 by the ease with which stolen or wrongfully appro2 priated proprietary economic information is trans3 ferred across State and national boundaries.

4 (b) PURPOSE.—The purpose of this Act is to promote

5 the development and lawful utilization of United States

6 proprietary economic information produced for, or placed

7 in, interstate and foreign commerce by protecting it from

8 theft, wrongful destruction or alteration, misappropria9 tion, and conversion.

10 SEC. 3. PREVENTION OF ECONOMIC ESPIONAGE AND PRO11 TECTION OF PROPRIETARY ECONOMIC IN12 FORMATION IN INTERSTATE AND FOREIGN

13 COMMERCE.

14 (a) IN GENERAL.—Title 18, United States Code, is

15 amended by inserting after chapter 89 the following new

16 chapter:

17 ‘‘CHAPTER 90—PROTECTION OF

18 PROPRIETARY ECONOMIC INFORMATION

‘‘Sec.

‘‘1831. Definitions.

‘‘1832. Criminal activities affecting proprietary economic information.

‘‘1833. Criminal forfeiture.

‘‘1834. Import and export sanctions.

‘‘1835. Extraterritoriality.

‘‘1836. Construction with other laws.

‘‘1837. Preservation of confidentiality.

‘‘1838. Law enforcement and intelligence activities.

19 ‘‘§ 1831. Definitions

20 ‘‘As used in this chapter:
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1 ‘‘(1) The term ‘person’ means a natural person,

2 corporation, agency, association, institution, or any

3 other legal, commercial, or business entity.

4 ‘‘(2) The term ‘proprietary economic informa5 tion’ means all forms and types of financial, busi6 ness, scientific, technical, economic, or engineering

7 information, including, but not limited to, data,

8 plans, tools, mechanisms, compounds, formulas, de9 signs, prototypes, processes, procedures, programs,

10 codes, or commercial strategies, whether tangible or

11 intangible, and however stored, compiled, or memori12 alized, if—

13 ‘‘(A) the owner has taken reasonable meas14 ures to keep such information confidential; and

15 ‘‘(B) the information derives independent

16 economic value, actual or potential, from not

17 being generally known to, and not being readily

18 ascertainable, acquired, or developed by legal

19 means by the public.

20 ‘‘(3) The term ‘owner’ means the United States

21 person or persons in whom, or United States Gov22 ernment component, department, or agency in

23 which, rightful legal, beneficial, or equitable title to,

24 or license in, proprietary economic information is re25 posed.
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1 ‘‘(4) The term ‘United States person’ means—

2 ‘‘(A) in the case of a natural person, a

3 United States citizen or permanent resident

4 alien; and

5 ‘‘(B) in the case of a nonnatural person,

6 an entity substantially owned or controlled by

7 the United States Government or by United

8 States citizens or permanent resident aliens, or

9 incorporated in the United States.

10 ‘‘§ 1832. Criminal activities affecting proprietary eco11 nomic information

12 ‘‘(a) Any person, with intent to, or reason to believe

13 that it will, injure any owner of proprietary economic in14 formation having a value of not less than $100,000 that

15 is produced for, or placed in, interstate commerce, and

16 with intent to convert it to his or her own direct use or

17 benefit or the direct use or benefit of another, knowingly—

18 ‘‘(1) steals, wrongfully appropriates, takes, car19 ries away, or conceals, or by fraud, artifice, or de20 ception obtains such information;

21 ‘‘(2) wrongfully copies, duplicates, sketches,

22 draws, photographs, downloads, uploads, alters, de23 stroys, photocopies, or replicates such information;
6

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1 ‘‘(3) receives, buys, or possesses such informa2 tion, knowing the same to have been stolen or

3 wrongfully appropriated, obtained, or converted;

4 ‘‘(4) attempts to commit any offense described

5 in paragraphs (1) through (3);

6 ‘‘(5) wrongfully solicits another to commit any

7 offense described in paragraphs (1) through (3); or

8 ‘‘(6) conspires with one or more other persons

9 to commit any offense described in paragraphs (1)

10 through (3), and one or more of such persons do any

11 act to effect the object of the conspiracy,

12 shall, except as provided in subsection (b), be fined not

13 more than $250,000 or imprisoned not more than 15

14 years, or both.

15 ‘‘(b) Any corporation that commits any offense de16 scribed in paragraphs (1) through (6) of subsection (a)

17 shall be fined not more than $10,000,000.

18 ‘‘§ 1833. Criminal forfeiture

19 ‘‘(a) Notwithstanding any provision of State law, any

20 person convicted of a violation under this chapter shall for21 feit to the United States—

22 ‘‘(1) any property constituting or derived from,

23 any proceeds the person obtained, directly or indi24 rectly, as the result of such violation; and
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1 ‘‘(2) any of the person’s property used, or in2 tended to be used, in any manner or part to commit

3 or facilitate the commission of such violation.

4 ‘‘(b) The court, in imposing a sentence on such per5 son, shall order, in addition to any other sentence imposed

6 pursuant to this chapter, that the person forfeit to the

7 United States all property described in this section.

8 ‘‘(c) Property subject to forfeiture under this section,

9 any seizure and disposition thereof, and any administra10 tive or judicial proceeding in relation thereto, shall be gov11 erned by section 413 of the Comprehensive Drug Abuse

12 Prevention and Control Act of 1970 (21 U.S.C. 853), ex13 cept for subsection 413(d) which shall not apply to forfeit14 ures under this section.

15 ‘‘(d) Notwithstanding section 524(c) of title 28, there

16 shall be deposited in the Crime Victims Fund established

17 under section 1402 of the Victims of Crime Act of 1984

18 (42 U.S.C. 10601) all amounts from the forfeiture of

19 property under this section remaining after the payment

20 of expenses and sale authorized by law.

21 ‘‘§ 1834. Import and export sanctions

22 ‘‘(a) The President may prohibit for a period of up

23 to 3 years, the importation into, or exportation from, the

24 United States of any product produced, made, assembled,
8

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1 or manufactured by a person convicted of any offense de2 scribed in section 1832.

3 ‘‘(b) The Attorney General may impose a civil penalty

4 not to exceed 5 times the value of the exports or imports

5 involved or $100,000, whichever is greater, against any

6 person who knowingly violates any order of the President

7 issued under the authority of this section. Such penalty

8 may be imposed only after notice and opportunity for a

9 hearing on the record in accordance with sections 554

10 through 557 of title 5.

11 ‘‘§ 1835. Extraterritoriality

12 ‘‘(a) This chapter applies to conduct occurring within

13 the United States.

14 ‘‘(b) This chapter applies to conduct occurring out15 side the territorial and special maritime jurisdiction of the

16 United States, its territories, and possessions if—

17 ‘‘(1) the offender is a United States person; or

18 ‘‘(2) the victim of the offense is an owner (as

19 defined in section 1831), and the offense was in20 tended to have, or had, an effect in the United

21 States.

22 ‘‘§ 1836. Construction with other laws

23 ‘‘This chapter shall not be construed to preempt or

24 displace any other Federal or State remedies, whether civil

25 or criminal, for the misappropriation of proprietary eco-
9

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1 nomic information, or to affect the otherwise lawful disclo2 sure of information by any government employee under

3 section 552 of title 5 (commonly known as the Freedom

4 of Information Act).

5 ‘‘§ 1837. Preservation of confidentiality

6 ‘‘In any prosecution under this chapter, the court

7 may enter such orders and take such other action as may

8 be necessary and appropriate to preserve the confidential9 ity of proprietary economic information, consistent with

10 rule 16 of the Federal Rules of Criminal Procedure, the

11 Federal Rules of Evidence, and other applicable laws. An

12 interlocutory appeal by the United States shall lie from

13 a decision or order of a district court authorizing the dis14 closure of proprietary economic information.

15 ‘‘§ 1838. Law enforcement and intelligence activities

16 ‘‘This chapter does not prohibit any lawfully author17 ized investigative, protective, or intelligence activity of a

18 law enforcement agency of the United States, a State, or

19 a political subdivision of a State, or an intelligence agency

20 of the United States.’’.

21 (b) TECHNICAL AMENDMENT.—The table of chapters

22 for title 18, United States Code, is amended by inserting

23 after the item relating to chapter 89 the following new

24 item:

‘‘90. Protection of Proprietary Economic Information ....... 1831’’.
10

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1 SEC. 4. WIRE AND ELECTRONIC COMMUNICATIONS INTER2 CEPTION AND INTERCEPTION OF ORAL COM3 MUNICATIONS.

4 Section 2516(1)(a) of title 18, United States Code,

5 is amended by inserting ‘‘chapter 90 (relating to economic

6 espionage and protection of proprietary economic informa7 tion in interstate and foreign commerce),’’ after ‘‘title:’’.

8 SECTION 1. SHORT TITLE.

9 This Act may be cited as the ‘‘Industrial Espionage

10 Act of 1996’’.

11 SEC. 2. FINDINGS AND PURPOSES.

12 (a) FINDINGS.—Congress finds that—

13 (1) sustaining a healthy and competitive na14 tional economy is imperative;

15 (2) the development and production of propri16 etary economic information involves every aspect of

17 interstate commerce and business;

18 (3) the development, production, protection, and

19 lawful exchange, sale, and transfer of proprietary eco20 nomic information is essential to maintaining the

21 health and competitiveness of interstate commerce and

22 the national economy;

23 (4) much proprietary economic information

24 moves in interstate and foreign commerce and propri25 etary economic information that does not move in

26 interstate or foreign commerce directly and substan-
11

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1 tially affects proprietary economic information that

2 does;

3 (5) the theft, wrongful destruction or alteration,

4 misappropriation, and wrongful conversion of propri5 etary economic information substantially affects and

6 harms interstate commerce, costing United States

7 firms, businesses, industries, and consumers millions

8 of dollars each year; and

9 (6) enforcement of existing State laws protecting

10 proprietary economic information is frustrated by the

11 ease with which stolen or wrongfully appropriated

12 proprietary economic information is transferred

13 across State and national boundaries.

14 (b) PURPOSE.—The purpose of this Act is—

15 (1) to promote the development and lawful utili16 zation of United States proprietary economic infor17 mation produced for, or placed in, interstate and for18 eign commerce by protecting it from theft, wrongful

19 destruction or alteration, misappropriation, and con20 version; and

21 (2) to secure to authors and inventors the exclu22 sive right to their respective writings and discoveries.
12

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1 SEC. 3. PREVENTION OF ECONOMIC ESPIONAGE AND PRO2 TECTION OF PROPRIETARY ECONOMIC IN3 FORMATION IN INTERSTATE AND FOREIGN

4 COMMERCE.

5 (a) IN GENERAL.—Title 18, United States Code, is

6 amended by inserting after chapter 89 the following new

7 chapter:

8 ‘‘CHAPTER 90—PROTECTION OF

9 PROPRIETARY ECONOMIC INFORMATION

‘‘Sec.

‘‘1831. Definitions.

‘‘1832. Criminal activities affecting proprietary economic information.

‘‘1833. Criminal forfeiture.

‘‘1834. Import and export sanctions.

‘‘1835. Extraterritoriality.

‘‘1836. Construction with other laws.

‘‘1837. Preservation of confidentiality.

‘‘1838. Prior authorization requirement.

‘‘1839. Law enforcement and intelligence activities.

10 ‘‘§ 1831. Definitions

11 ‘‘As used in this chapter:

12 ‘‘(1) The term ‘person’ means a natural person,

13 corporation, agency, association, institution, or any

14 other legal, commercial, or business entity.

15 ‘‘(2) The term ‘proprietary economic informa16 tion’ means all forms and types of financial, business,

17 scientific, technical, economic, or engineering infor18 mation, including data, plans, tools, mechanisms,

19 compounds, formulas, designs, prototypes, processes,

20 procedures, programs, codes, or commercial strategies,
13

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1 whether tangible or intangible, and whether stored,

2 compiled, or memorialized physically, electronically,

3 graphically, photographically, or in writing that—

4 ‘‘(A) the owner thereof has taken reasonable

5 measures to keep such information confidential;

6 and

7 ‘‘(B) the information derives independent

8 economic value, actual or potential, from not

9 being generally known to, and not being readily

10 ascertainable, acquired, or developed by legal

11 means by the public.

12 The term does not include any general knowledge, ex13 perience, training, or skill that a person lawfully has

14 acquired due to his work as an employee of or as an

15 independent contractor for any person.

16 ‘‘(3) The term ‘owner’ means the States person

17 or persons in whom, or United States Government

18 component, department, or agency in which, rightful

19 legal, beneficial, or equitable title to, or license in,

20 proprietary economic information is reposed.

21 ‘‘(4) The term ‘United States person’ means—

22 ‘‘(A) in the case of a natural person, a

23 United States citizen or permanent resident

24 alien; and
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1 ‘‘(B) in the case of a nonnatural person, an

2 entity substantially owned or controlled by the

3 United States Government or by United States

4 citizens or permanent resident aliens, or incor5 porated in the United States.

6 ‘‘(5) The term ‘without authorization’ means not

7 permitted, expressly or implicitly, by the owner.

8 ‘‘§ 1832. Criminal activities affecting proprietary eco9 nomic information

10 ‘‘(a) Any person, with intent to, or reason to believe

11 that it will, injure any owner of proprietary economic in12 formation having a value of not less than $100,000 and

13 with intent to convert it to his or her own use or benefit

14 or the use or benefit of another, knowingly—

15 ‘‘(1) steals, or without authorization appro16 priates, takes, carries away, or conceals, or by fraud,

17 artifice, or deception obtains such information;

18 ‘‘(2) without authorization copies, duplicates,

19 sketches, draws, photographs, downloads, uploads, al20 ters, destroys, photocopies, replicates, transmits, deliv21 ers, sends, mails, communicates, or conveys such in22 formation;

23 ‘‘(3) receives, buys, or possesses such information,

24 knowing the same to have been stolen or appro25 priated, obtained, or converted without authorization;
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1 ‘‘(4) attempts to commit any offense described in

2 paragraphs (1) through (3);

3 ‘‘(5) wrongfully solicits another to commit any

4 offense described in paragraphs (1) through (3); or

5 ‘‘(6) conspires with one or more other persons to

6 commit any offense described in paragraphs (1)

7 through (3), and one or more of such persons do any

8 act to effect the object of the conspiracy,

9 shall, except as provided in subsection (b), be fined up to

10 $250,000, or twice the value of the proprietary economic

11 information, whichever is greater, or imprisoned not more

12 than 10 years, or both.

13 ‘‘(b) Any corporation that commits any offense de14 scribed in paragraphs (1) through (6) of subsection (a) shall

15 be fined up to $10,000,000, or twice the economic value of

16 the proprietary economic information, whichever is greater.

17 ‘‘(c) This section does not prohibit the reporting of any

18 suspected criminal activity or regulatory violation to any

19 appropriate agency or instrumentality of the United States,

20 or a political subdivision of a State, or to Congress.

21 ‘‘§ 1833. Criminal forfeiture

22 ‘‘(a) Notwithstanding any provision of State law, any

23 person convicted of a violation under this chapter shall for24 feit to the United States—
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1 ‘‘(1) any property constituting or derived from,

2 any proceeds the person obtained, directly or indi3 rectly, as the result of such violation; and

4 ‘‘(2) any of the person’s property used, or in5 tended to be used, in any manner or part to commit

6 or facilitate the commission of such violation.

7 ‘‘(b) The court, in imposing a sentence on such person,

8 shall order, in addition to any other sentence imposed pur9 suant to this chapter, that the person forfeit to the United

10 States all property described in this section.

11 ‘‘(c) Property subject to forfeiture under this section,

12 any seizure and disposition thereof, and any administrative

13 or judicial proceeding in relation thereto, shall be governed

14 by section 413 of the Comprehensive Drug Abuse Prevention

15 and Control Act of 1970 (21 U.S.C. 853), except for sub16 section 413(d) which shall not apply to forfeitures under

17 this section.

18 ‘‘(d) Notwithstanding section 524(c) of title 28, there

19 shall be deposited in the Crime Victims Fund established

20 under section 1402 of the Victims of Crime Act of 1984 (42

21 U.S.C. 10601) all amounts from the forfeiture of property

22 under this section remaining after the payment of expenses

23 and sale authorized by law.
17

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1 ‘‘§ 1834. Import and export sanctions

2 ‘‘(a) The President may, to the extent consistent with

3 international agreements to which the United States is a

4 party, prohibit, for a period of not longer than 5 years,

5 the importation into, or exportation from, the United

6 States, whether by carriage of tangible items or by trans7 mission, any merchandise produced, made, assembled, or

8 manufactured by a person convicted of any offense described

9 in section 572 of this title, or in the case of an organization

10 convicted of any offense described in such section, its succes11 sor entity or entities.

12 ‘‘(b)(1) The Secretary of the Treasury may impose on

13 any person who knowingly violates any order of the Presi14 dent issued under the authority of this section, a civil pen15 alty equal to not more than 5 times the value of the exports

16 or imports involved, or $100,000, whichever is greater.

17 ‘‘(2) Any merchandise imported or exported in viola18 tion of an order of the President issued under this section

19 shall be subject to seizure and forfeiture in accordance with

20 sections 602 through 619 of the Tariff Act of 1930.

21 ‘‘(3) The provisions of law relating to seizure, sum22 mary and judicial forfeiture, and condemnation of property

23 for violation of the United States customs laws, the disposi24 tion of such property or the proceeds from the sale thereof,

25 the remission or mitigation of such forfeiture, and the com26 promise of claims, shall apply to seizures and forfeitures
18

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1 incurred, or alleged to have been incurred under this section

2 to the extent that they are applicable and not inconsistent

3 with the provisions of this chapter.

4 ‘‘§ 1835. Extraterritoriality

5 ‘‘(a) This chapter applies to conduct occurring within

6 the United States.

7 ‘‘(b) This chapter applies to conduct occurring outside

8 the territorial and special maritime jurisdiction of the

9 United States, its territories, and possessions if—

10 ‘‘(1) the offender is a United States person; or

11 ‘‘(2) an act in furtherance of the offense was

12 committed in the United States.

13 ‘‘§ 1836. Construction with other laws

14 ‘‘This chapter shall not be construed to preempt or dis15 place any other Federal or State remedies, whether civil or

16 criminal, for the misappropriation of proprietary economic

17 information, or to affect the otherwise lawful disclosure of

18 information by any government employee under section 552

19 of title 5 (commonly known as the Freedom of Information

20 Act).

21 ‘‘§ 1837. Preservation of confidentiality

22 ‘‘In any prosecution under this chapter, the court may

23 enter such orders and take such other action as may be nec24 essary and appropriate to preserve the confidentiality of

25 proprietary economic information, consistent with rule 16
19

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1 of the Federal Rules of Criminal Procedure, the Federal

2 Rules of Evidence, and other applicable laws. An interlocu3 tory appeal by the United States shall lie from a decision

4 or order of a district court authorizing the disclosure of pro5 prietary economic information.

6 ‘‘§ 1838. Prior authorization requirement

7 ‘‘The United States may not file a charge under this

8 chapter or use a violation of this chapter as a predicate

9 offense under any other law without the personal approval

10 of the Attorney General, the Deputy Attorney General, or

11 the Assistant Attorney General for the criminal Division

12 of the Department of Justice.

13 ‘‘§ 1839. Law enforcement and intelligence activities

14 ‘‘This chapter does not prohibit any and shall not im15 pair otherwise lawful activity conducted by an agency or

16 instrumentality of the United States, a State, or a political

17 subdivision of a State, or an intelligence agency of the Unit18 ed States.’’.

19 (b) TECHNICAL AMENDMENT.—The table of chapters

20 for title 18, United States Code, is amended by inserting

21 after the item relating to chapter 89 the following new item:

‘‘90. Protection of Proprietary Economic Information .......... 1831’’.
20

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1 SEC. 4. WIRE AND ELECTRONIC COMMUNICATIONS INTER2 CEPTION AND INTERCEPTION OF ORAL COM3 MUNICATIONS.

4 Section 2516(1)(a) of title 18, United States Code, is

5 amended by inserting ‘‘chapter 90 (relating to economic es6 pionage and protection of proprietary economic informa7 tion in interstate and foreign commerce),’’ after ‘‘title:’’.