Commercial Spying: What’s the Solution?

Robert D. Atkinson October 27, 2016
October 27, 2016

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In 2012, NSA chief General Keith Alexander warned that the loss of U.S. commercial information and intellectual property represented the “greatest transfer of wealth in history.” Despite the dire and accurate warning, little has changed. If anything, the threats to U.S. economic prosperity and national security have grown.

In part this is because the Washington defense and intelligence establishment is fighting a different war: the war on terror. But the war on commercial espionage is at best a skirmish, at least in terms of our response. This is why the new book Securing U.S. Innovation: The Challenge of Preserving a Competitive Advantage in the Creation of Knowledge is so important. Written by Darren Tromblay and Robert Spelbrink, a career FBI intelligence analyst and agent, respectively, the book is a must read for anyone concerned about America’s economic future.

Tromblay and Spelbrink provide an insider’s view of the U.S. government’s efforts to stop the rampant and growing “pillaging” of U.S. knowledge by foreign actors. They provide a no-holds-barred look at how our adversaries, and even our “allies,” are engaged in a systematic effort to collect and exploit key information, including by “buying in,” “selling out,” and outright stealing key U.S. technology assets, posing a threat to U.S. military and commercial innovation leadership. This book, a wake-up call to U.S. companies, universities, think tanks, and others who for too long have turned a blind eye to the challenge of foreign innovation acquisition, should be required reading for the next U.S. president.

I explored these issues with the authors at a fascinating ITIF forum this week. One historical item we discussed was the Farewell Dossier, a fascinating effort by the U.S. government to dupe the Soviets during the Cold War by letting them steal defective technology plans. The Soviet Council of Ministers and the Central Committee established a new unit, Directorate T of the KGB's First Chief Directorate, to plumb the R&D programs of Western economies, and its operating arm Line X. In 1972, when delegations of Soviet specialists came to visit U.S. firms and laboratories, Line X populated these delegations with its own people. In an agricultural delegation of 100 people, about one-third were intelligence officers. On a visit to Boeing, a Soviet guest applied adhesive to shoes to obtain metal samples. (Interestingly, a similar scene is played out in the second season of the FX series The Americans.)

It took a good 10 years and the election of a president, Ronald Reagan, who took the Soviet threat seriously, before the U.S. government could really get organized to attempt to counter Soviet economic espionage. Yet today we are still a long way from that kind of recognition regarding current threats. The authors discussed two reasons for this. The first is that in those years the threat was clearly military and geopolitical, so the Washington national security and intelligence establishment took the threat from Soviet commercial espionage seriously. Today, the focus remains on military and the “great game” and not on foreign commercial threats to our competitiveness. A second factor that has changed is that the innovation system has become much more open and diverse, making it much harder to protect. In the Soviet era, the targets were much more limited—principally defense-related establishments. Today, the targets span the spectrum as competitor nations seek to gain advantage in a wide range of technologies.

But make no mistake about it, this is a threat not just to U.S. companies, but also to U.S. national security. As the authors write, our national security now critically depends on our national power, which in turn is dependent on broad-based U.S. technological leadership. There is a lot Congress and the next administration need to do, including transforming the Committee on Foreign Investment (CFIUS) for the 21st century, prioritizing commercial intelligence collection and analysis in the national intelligence community, revising and strengthening criminal penalties for IP theft and commercial espionage, reforming our securities and investment system to relieve U.S. corporations of the intense pressure for producing short-term financial results (which can lead them to make ill-advised deals with foreign companies), and establishing a new division within the White House National Security Council to ensure that this critical issue gets the attention it deserves across the entire federal government.