What Is Economic Espionage?

Economic espionage is the unlawful targeting and theft of critical economic intelligence, such as trade secrets and intellectual property. The term refers to the clandestine acquisition or outright theft of invaluable proprietary information in a number of areas, including technology, finance, and government policy. Offenders get cheap access to critical information, leading victims to suffer steep economic losses.

Key Takeaways

  • Economic espionage is the unlawful targeting and theft of critical economic intelligence, such as trade secrets and intellectual property.
  • It is likely to be state-sponsored, and have motives other than profit or gain—such as closing a technology gap.
  • The Economic Espionage Act was signed into law in October 1996, criminalizing misappropriation of trade secrets and giving the government the right to pursue such cases in the courts.
  • China has been accused of being the world’s “most active and persistent” perpetrator of economic espionage.

Understanding Economic Espionage

Economic espionage differs from corporate or industrial espionage in a number of ways. It is likely to be state-sponsored, have motives other than profit or gain (such as closing a technology gap), and be much larger in scale and scope.

The U.S. recognizes the threat from such activity and responded by signing the Economic Espionage Act into law in October 1996, criminalizing misappropriation of trade secrets and giving the government the right to pursue such cases in the courts.

The Federal Bureau of Investigation (FBI) defines economic espionage in the following way:

“Economic espionage is foreign power-sponsored or coordinated intelligence activity directed at the U.S. government or U.S. corporations, establishments, or persons, designed to unlawfully or clandestinely influence sensitive economic policy decisions or to unlawfully obtain sensitive financial, trade, or economic policy information; proprietary economic information; or critical technologies. This theft, through open and clandestine methods, can provide foreign entities with vital proprietary economic information at a fraction of the true cost of its research and development, causing significant economic losses.”

Economic Espionage Methods

According to the FBI, foreign competitors conduct economic espionage in three main ways:

  • By recruiting insiders working for U.S. companies and research institutions that typically share the same national background.
  • Using methods such as briberycyber-attacks, “dumpster diving” and wiretapping.
  • Establishing seemingly innocent relationships with U.S. companies to gather economic intelligence, including trade secrets.

To counter this threat, the FBI advises companies to stay alert. A number of steps are recommended, including implementing a proactive plan to safeguard trade secrets, securing physical and electronic versions of intellectual property, and training employees.

Examples of Economic Espionage 

A 2003 report by the Commission on the Theft of American Intellectual Property estimated that economic espionage of intellectual property has an economic impact of about $300 billion per year and costs the U.S. job market about 2.1 million jobs.

Important

Important: Many cases of economic espionage may go unreported, as companies who fall victim to it may suffer a loss in stock value if they report such a breach.

In November 2011, the U.S. accused China of being the world’s “most active and persistent” perpetrator of economic espionage. A report by the U.S. International Trade Commission claimed that intellectual property-intensive firms in the U.S. lost $48 billion in 2009 because of Chinese infringements. Russia was also identified as one of the most aggressive collectors of U.S. economic information and technology. 

The problem's scale was evident in subsequent media reports that said hundreds of leading U.S. companies had been targeted by overseas entities for economic espionage. 

Criticism of Economic Espionage 

In recent years, the number of defendants indicted under the U.S. Economic Espionage Act with Chinese names has surged. From 1997 to 2009, 17% of defendants were Chinese. From 2009 to 2015 that rate more than tripled to 52%, according to Cardozo Law Review.

The same study also revealed that 21% of Chinese defendants are never proven guilty. These findings have fueled allegations that federal agents and prosecutors are unfairly profiling ethnic Chinese people as spies.