tv Key Capitol Hill Hearings CSPAN May 15, 2014 12:00pm-2:01pm EDT
the presiding officer: anyone else looking to vote or change their votes? anyone else seeking to vote or change their votes? if not, then the ayes are 59 and the nays are 35. the motion is agreed to. cloture having been invoked, the clerk will report the nomination. the clerk: douglas l. rayes of arizona to be u.s. district judge for the district of arizona. the presiding officer: under the previous order, there will now be two minutes of debate equally divided. a senator: yield back. the presiding officer: without objection, all time is yielded back. the clerk will report the motion to invoke cloture. the clerk: cloture motion. we, the undersigned senators, in
accordance with the provisions of rule 22 of the standing rules of the senate, hereby move to bring to a close the debate on the nomination of james alan soto of arizona to be united states district judge for the district of arizona. signed by 17 senators. the presiding officer: by unanimous consent, the mandatory quorum call has been waived. the question is: is it the sense of the senate that the debate on the nomination of james alan soto of arizona to be the united states district judge for the district of arizona, shall be brought to a close? the yeas and the nays are mandatory under the rule. the clerk will call the roll. vote:
there any senators wishing to vote or wishing to change their vote? if not, on this vote, the vote is 61 in the affirmative. 35 in the negative. the motion is agreed to. cloture having been invoked, the clerk will report the nomination. the clerk: james alan soto of arizona to be united states district judge for the district of arizona. the presiding officer: under the previous order, the senate will proceed to the consideration of the following nominations which the clerk will report. the clerk: department of state, helen meagher la lime of the district of columbia to be ambassador. the judiciary, gregg jeffrey costa of texas to be united states -- department of justice,
leslie ragon caldwell of new york to be assistant attorney general. mrs. murray: mr. president? the presiding officer: the senator from washington. mrs. murray: i ask unanimous consent to yield back time on both nominations. the presiding officer: without objection. under the previous order, the question is on the caldwell nomination. all those in favor say aye. opposed no. the ayes appear to have it. the ayes have it. the nomination is approved. the president will be notified. under the previous order, the question is on the la lime nomination. all those in favor aye. opposed, no. the ayes appear to have it. the ayes do have it. the nomination is approved. under the previous order, the motions to reconsider are considered made and laid on the table. and the president will be immediately notified of the senate's action. mrs. murray: mr. president?
the presiding officer: the senator from washington. mrs. murray: i have nine unanimous consent requests for committees to meet during today's session of the senate. they have the approval of the majority and minority leaders. i ask unanimous consent these requests be agreed to and be printed in the record. the presiding officer: without objection. under the previous order, the senate stands in recess until senate stands in recess until
you see chairman bernie sanders on your screen now. live coverage on c-span continues. also testifying representatives from veterans groups and from the departments inspector general's office. also asking you what you think of the hearing on social media platforms through our facebook page and on twitter using #cspanchat. also a schedule note, a hearing on the va will re-air tonight at eight eastern on c-span. this afternoon also on c-span the senate health committee will be examining the food and drug administration's recent proposal to control e-cigarettes and other currently nonregulated tobacco products. live coverage starting at 2:30 p.m. eastern. >> c-span's newest book, "sundays at eight," a collection of interviews of the nation's best storytellers including david mccullough. >> we are sitting here today in a city designed by a frenchman,
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415 years the only television network devoted to nonfiction books and authors. c-span2 created by the cable tv industry and brought to you as a public service by your local cable or satellite provider. watch us in hd, lik like us on facebook and followers on terr twitter.hearing t get >> now a hearing on trade secret theft, companies are impacted and whether there are sufficient laws to punish violators. on tuesday a senate judiciary subcommittee heard from the fbi, the boeing corporation and eli lilly pharmaceuticals among others about the issue. senator sheldon whitehouse chairs the subcommittee and senator lindsey graham is the ranking member. [inaudible conversations]
>> the hearing of the senate judiciary subcommittee on crime and terrorism will come to order. am> t expecting that my rankin member, senator lindsey graham, will be here shortly but i just saw him on the c-span screen so i know that he's on the floor and not here.screen,o i but i permission from his staff to proceed and he will join us as soon as his schedule permits. i also want to recognize in the audience at pagano who has spent lso many happy hours in your window working for chairman leahy. it's good to have him back in a differentagano who capacity. ho we are having a hearing today c thatha he's entitled economicren espionage and trade secret theft, are our laws adequate for reday's threats? sec today the subcommittee is going
to explore how we can. better protect american businesses from those who try to steal their valuable intellectual property. american companies are renowned as being the most innovative in the world. companies of every size and in every industry, from manufacturing to software to biotechnology to aerospace owned large portfolios of legally protected trade secrets they have developed and innovative. in some cases the secret sauce may be a company's most valuable asset. the theft of these secrets can lead to devastating consequenc consequences. for small businesses they can be a matter of life and death. the risk of trade secret theft has been around as long as there have been secrets to protect. there's a reason why coca-cola has kept its formula locked away in a vault for decades.
but in recent years the methods used to steal trade secrets have become more sophisticated. companies now must confront the reality that they are being attacked on a daily basis by cybercriminals who are determined to steal their intellectual property. as attorney general holder has observed, there are two kinds of companies in america, those that have been hacked and those that don't know that they have been hacked. today, a criminal can steal all of trade secrets a company owns from thousands of miles away without the company ever noticing. many of the cyber attacks we're seeing on the work of foreign governments. china and other nations now routinely steal from american businesses and give secrets to their own companies.
they are version of competition. and let's be clear. we do not do the same to them. we are now going through a healthy debate in america about the scope of government surveillance, that there is no dispute about one thing. our agencies do not steal from foreign businesses to help american industries. while cyber attacks are increasing, traditional threats remain. company insiders can still walk off with trade secrets to sell to the highest bidder. competitors skills steel secrets by trickery or by breaking into an office. it is impossible determine the full extent of the loss to american businesses. as a result of the theft of trade secrets and other intellectual property. there have been estimates that our nation may lose anywhere from one to 3% of our gross
domestic product through trade secret theft alone. the defense department has said that every year and amount of intellectual property larger than that contained in the library of congress is stolen from computer networks belonging to american businesses and government. and estimates of valley of ip stolen by foreign actors are as high as $300 billion. general keith alexander, until recently the head of nsa and of cyber command at the pentagon, has characterized the cyber theft of american intellectual property as, i'll quote, the greatest transfer of wealth in history. and, of course, we are on the losing end of it. but no estimate can fully capture the real impact of trade secret theft.
because when other countries and foreign businesses steal our trade ideas. they are stealing our innovation. most importantly, they are stealing our jobs. in my state of rhode island we continue to face high unemployment. despite having some of the most innovative businesses in the country. if we don't protect our businesses from those who steal their intellectual property we are letting the innovation go to waste and we are letting american jobs go overseas. in the past, some companies were reluctant to talk about the issue. because no one likes to admit that they have been victimized. but many are now coming forward to speak out because they recognize how important it is that we work together to address this common threat. i particularly want to thank the company representatives who are appearing before us today in the
second panel as well as many, many others who worked closely with me and with other senators on this issue. i'm encouraged that the administration last year released a blueprint for a strategy to combat trade secret theft. agencies across the government are increasing efforts to address this problem. the administration must recognize the theft of intellectual property is one of the most important foreign policy challenges we face. it must communicate that stealing from our businesses to help their business is unacceptable. we must do our part. we need to make sure our criminal laws in this area are adequate and up to date. last fall senator graham and i released a discussion draft of legislation designeded to
clarify that state sponsored overseas hacking could be prosecuted as economic espionage. to strengthen criminal protection of trade secrets. we received valuable suggestions about this. we look forward to hearing from witnesses today about how to improve our laws and what we can do to help defend our industries. we hope to introduce our legislation in the coming weeks. companies need civil are remedies against those who steal from them. while state law has traditionally provided companies with remedies for misappropriation of trade secrets there is currently no federal law that allows companies themselves to seek civil remedies against those who steal from them. senators kuhns and hatch have introduced legislation to give victims of trade secret theft
the option of pursuing thieves in federal court. senate flake has introduced legislation to give companies a federal-civil remedy for trade secret theft. i hope the judiciary committee will act soon on legislation to strengthen both the criminal and civil protections against trade secret theft. i look forward to working with those colleagues toward that goal. today we will hear from witnesses in government, industry who confront the threat on a daily basis. what i hope will be clear by the end of the hearing is we need an all-in approach to the hearing. we must strengthen criminal laws and the law enforcement agencies stopping trade secret theft before it occurs. and investigate and prosecute when it does occur. i would add there remains an urgent need for us to pass
broader cyber security legislation. i appreciate working with senator graham on that effort. i look forward to hearing from our witnesses today. and to working with my colleagues on both sides of the aisle to address this critical issue. our first witness is randall c. coleman, assistant director of the counter intelligence division at the federal bureau of investigation. mr. coleman is responsible for ensuring the fbi carries out the mission to defeat foreign intelligence threats. mr. cole man began his career as a special agent with the fbi in 1997. he's previously served as assistant special agent in charge of the san antonio division, chief of the counter espionage section and special agent in charge of the little rock division. prior to his appointment to the fbi mr. coleman served as an officer in the united states
army for nine years. we are delighteded that he could join us today. we ask him to proceed with his testimony. proceed, sir. >> good afternoon. i'm pleased to be here with you today to discuss the fbi's efforts to combat economic espionage and theft of trade secrets. the fbi consider it is investigation of theft of trade secrets and economic espionage a top priority. in 2012 alone the national counter intelligence executive estimated a range of loss to the u.s. economy approaching $400 billion. to foreign adversaries and competitors who by illegally obtaining a broad range of trade secrets degrade our nation's advantage in innovative research and development in the global market. this loss threatens the security of our economy and preventing such loss requires constant vigilance and aggressive. the fbi is working to apprehend
those pursuing economic espionage against clear defense contractors and government agencies. it's made a significant progress in putting some of the most egregious offenders behind bars. economic espionage and theft of trade secrets are linked to the insider threat and the growing et theft.cyber enabled trade or maybe serving as a spy to benefit of the organizations or country. foreign competitors aggressively target and recruit insiders to aid the transmittal of a company's most valuable proprietary information. the fbi, however, cannot protect the nation's economy by acting alone. the fbi counterintelligence division strategic partnership program oversees a network of more than 80 special agents that are serving a strategic program coordinators who work hand in hand with industry and academic
institutions across the country. these partnership coordinated conduct in person classified and unclassified threat presentations and briefings and it serves as an early referral mechanism for reports of possible economic espionage, theft of trade secrets and cyber intrusions. working through the more than 15,000 contacts nationwide this program helps companies detect, deter and defend against attacks of sensitive proprietary information from a foreign adversary. the fbi takes seriously its role to investigate and apprehend targets pursuing economic espionage. and by from in close partnership with local logical businesses and academic and government institutions, the fbi wishes to have greater impact on preventing and deterring the loss of trade secrets before any laws can actually occur. thank you again for the opportunity to testify and i look forward to answering any of your questions. >> i'd like to talk to you about
a couple things. first of all, have you any specific reaction to the draft legislation that senator graham and i circulated for discussion purposes the? i'll stand on this. if any legislation that allows the fbi to have a better advantage at going after our foreign adversaries as it relates to economic espionage and theft of the proprietary information to the fbi is in favor of. >> presumably the people we're working with other department justice, do you support the arguments and points that are making? >> absolutely. >> one of the things that i have observed and i've watched this for a while, is that whenever i hear about a case that is brought for intellectual property theft, in every case that i've found so far there's been some nexus to old-fashioned
type intellectual property theft. somebody taking the dvd home, somebody taking the patented item out of the factory. we have seen an explosion in fewer cyberintrusion and extraction through the cybernetwork of intellectual property with no other technique involved. and to my knowledge there have been no charges brought, ever, against anyone for that kind of activity. i understand that these cases are very complicated. i understand that they have huge forensic issues that there's an overlay with national security with intelligence services that requires a lot of effort. i understand that some of the targets are overseas and that creates a whole other array of league at and other issues. trust me having served as united
states attorney i can see how very challenging these cases are to make the going out general alexander singh we're on the losing end of the biggest transfer of wealth in human history, he would like to see a little bit more actual hard prosecution activity. can you tell me what you think is behind that and is there anything that we can do? is just a resource question? what do we do in congress to start putting points on the board against these people in criminal law courts? >> chairman, i think you described it to a t. obviously, when you get outside of the boards of the united states in many of these investigation was there's a foreign nexus, our ability to conduct effective investigations has diminished greatly. i will die that we do have ongoing investigations that it would foresee as having a logical conclusion that i think
you would agree that as you described. in fact, the fbi has actually placed cyber assets and resources working with the counterintelligence resources at our national cyberintrusion task force that are working hand in hand and shoulder to shoulder on the specific investigations. 's i think technology plays a critical role in the advancement of technology, makes the threat that much more complicated. but i think there's been tremendous progress made by the fbi along with our partners at investigating these type of crimes. so i'm hopeful as we go forward that will be able to demonstrate that we have been affected and will be effective in this arena. >> i would want to do just that the fbi has not been effective. i've been out to see you guys
out there. if i had to take my concern and turn it into just a single phrase, it wouldn't be the fbi is not effective. it would be the fbi is so busy trying to keep track of who's coming through the doors and coming through the windows and trying to warn all the companies that they are hacking into that there is simply a resource constraint in terms of taking all that effort which could be devoted to tracking all of these attacks and trying to help our businesses. there just isn't the capability or enough capability to sit down and go through putting a prosecution package together, working through the intelligence agencies and doing all the other steps that need to be done. so in many ways i'm trying to throw you a friendly question, saying let us help you do what needs to be done in terms of the resources. resources. i would want to take anything off of what they're doing out there and/or to put a
prosecution package together. but at some point we have to have a robust enough response to this problem as a country that we are starting to, for want of a better example, indict chinese colonels and generals who were behind pulling this kind of thievery off. >> i think another part of what i think is important is, and you described it, the threat is so immense that that's what makes this outreach efforts are important to what we are doing, and bringing in the private sector and academic institutions to work hand in hand with us so we can actually try to get out in front of this threat. you are absolutely right. the threat is so immense that the fbi cannot take this on alone. whatever necessary help that we can get in those other industries and sectors, which is a great help to us. >> there's a provision in the
last appropriations bill that requires the department of justice to do a report for us, looking forward, looking out a couple years and thinking about what the structure should be, like for addressing this particular threat. it's exploded as you know. it explodes even further every year. it grows just at massive levels. i'm not convinced at this point that the present setup makes sense, and if you look at another area that exploded, look at what happened with aviation again and what its effect was on the conduct of warfare. you started with the army air effort as subpart of the signal
corps, and then he became a subpart of the army. and it wasn't really until after world war ii that you had a full on u.s. air force. since then we've been a very successful leader in the theater of military operations, but until then we really weren't set up right. i'm not convinced that we are set up right, and i would invite you to comment on that but let me also ask a question for the record that you can take back to headquarters. how does it make sense to have these kind of cases perhaps in your counterintelligence division, perhaps in the cyber division, perhaps in the criminal division, how do you sort of angst those three divisions to have this be efficient and smooth flowing? because i understand that each of those different sections have a piece of this. this. >> i think the first part of your comment is, are we
structured right, and i will tell you that i look at this on a daily basis. it is certainly a priority for our director, as to look at our we efficiently and effectively addressing the threats. and i will tell you in the counterintelligence division economic espionage has become a priority because of expansion of the threat. so there are always ways that we are looking to better address this. some of the more significant effort that we've made is to really have outreach, and i can't stress how important that is to this process and what benefits that we've seen from that. we've expanded our contacts across the country 215,000 contacts. we are conducting over 7800 presentations and briefings a year, and we are starting to see just the maturity of these relationships is starting to pay
off in the fact that companies are starting to come to us, academic institutions are actually coming to his early on and calling the contact so we can get engaged in the problem very early period. versus after a bad actor has left the company with two or three terabytes of information has already left. so that is absolutely a victory for us and in this process, but we have a lot of room for improvement that we will continue to do. we are always looking at ways to improve that. >> in the context of that, if you could take as a question for the record and get an official response from your organization. i'm interested in whether you think five years out, 10 years out that similar division across all those separate parts of the bureau will continue to be a wise allocation, or whether we are in sort of a transit step towards what ultimately will be the way we address this.
>> yes, mr. chairman. understand. >> thank you for your service. i know this is an immensely challenging area that calls on all sorts of different resources, and i'm proud of the way the fbi conducts itself in this area and i appreciate your service to our country. >> mr. chairman, thank you very much for having me today. >> will take a two-minute recess while the next panel gets itself sorted out. come back into action. [inaudible conversations]
i thank the witnesses for attending and participating in this evening. we have a terrific panel of witnesses, and i'm delighted that you're all here. this is very promising. peter hoffman is the vice president of intellectual property management for the boeing company, which has plenty of intellectual property to manage. he has worked there since 1984 and in his current role diminishes the company's patent portfolio, protection of its trade secrets and licensing of technical data images, consumer product, trademark and patents. prior to being appointed to his current position, mr. hoffman served as the director of global research and develop a strategy for boeing research and technology, which is the company's advanced research organization. welcome him, and why don't you give your statement and i'll
introduce and take a statement of each witness and will open it up for questions after that. >> good afternoon, chairman whitehouse. on behalf of the boeing company i thank you for convening this hearing and i'm grateful for your leadership on efforts to improve trade secret laws. it's a premise to be a participant on this panel to provide boeing's view of the challenges faced by america's innovators. bowling first began making twin float airplanes in 1915 from a small red boathouse in seattle, and while much is just since then our company remains unique in that we assemble, test and deliver most of her highly competitive products right here in the united states. the final assembly facilities for our commercial products are located in the states of washington and south carolina, but we have facilities for engineering and manufacturing major component in multiple states including oregon, florida, california, montana and utah. our defense and space for the production is primarily located
in the states of california, missouri, pennsylvania, texas, arizona, florida and alabama. boeing employs one and 60,000 people across the united states. since 2005 we agreed more than 15,000 new, high-paying jobs driven by a record backlog. last year we paid $48 billion to more than 15,600 u.s. businesses which collectively support in addition 1.5 million jobs across the country. boeing significant cogitation to the u.s. economy today and for the past 100 years is a result of the ingenuity of our highly skilled employees. in the vetting each step of the way they develop the most thought -- sought after project and technology and will. approximate $3 billion of research and development per year. the bulk of our innovations are protected as trade secrets. because of this, trade secret protections are vital to
securing boeing's intellectual property. boeing does not have one recipe for its secret sauce. we have thousands of trade secrets that are critical to maintaining our unparalleled success. unfortunately, always valuable engineering and business information is at significant risk. once public disclose, rights and trade secrets may be lost forever. investments wiped out in an instant along with a competitive vantage those trade secrets provided. of course, boeing is on constant guard to prevent theft of our trade secrets but the discoveries cannot simply lock their trade secrets in a safe. the vast majority of our business and engineering information is stored electronically. the digital age has brought great gains in productivity but has increased risk. at the moment we could lose a trade secret through a breach in our network, by one of our employees or partners or through an escape at one of our many suppliers facilities. fear of trade secret theft is not a concern just for boeing. middle and small size companies that rely on trade secrets have as much or more to fear as big
companies. particularly if there's -- depends on the single product or service. given to rescue his country face everyday, more needs be done to deter thieves from stealing our trade secrets. this that is a crime and we must send a clear message that we will not stand by as thieves harm our businesses can hurt our economy and steal our jobs. thus we strong support your efforts, chairman whitehouse, and also the efforts of ranking member graham to call attention to the issue and to provide law enforcement with additional tools to deter trade secret theft. the uniform trade secrets act provides a general framework for state legislatures to adopt tradtrade secret protection bute stench of procedures adopted can vary from state to state and jurisdictional issues that complicate matters for the. as such it is a concern of u.s. companies that state action of the uniform trade secrets act may not in some cases beating me enough to prevent the loss of a trade secret. we also acknowledge the need for
companies to have the ability to take immediate action of our own in federal court to prevent the loss of our bible trade secrets and state courts and federal law enforcement and not act quickly enough. therefore we would also like to thank senator coons and senator hatch for introducing the defender trade secrets act, and your efforts to establish the right for a company to file an application in federal district court in order to seize property, proprietary property contained in trade secrets stolen from a company. we look forward to working with senator coons and senator hatch on this bill and supporting your efforts to encourage congress to act quickly to pass this important legislation. we are also encouraged that the new laws if passed would strengthen overseas trade secret enforcement by raising awareness of the issue, promoting cooperation between u.s. and foreign law enforcement and empowering our trade negotiators to encourage our trading partners to raise the bar. in conclusion we applaud your efforts to highlight this issue
and to strengthen u.s. trade secret laws and thereby help protect our bible assets. thank you for your time and hearing our concerns. >> thank you, mr. hoffman but i appreciate your testimony. our next witness is pamela passman, the president and ceo of the center for responsible enterprise in trade, also known as create.org or create is a global non-government organization dedicated to helping companies and supply chain members implement leading practices for preventing corruption and protecting intellectual property. choir to founding c.r.e.a.t. in october 2011, ms. passman was a corporate vice president and deputy general counsel for global corporate and revelatory affairs at microsoft where she had worked since 1996. i have to say i have as a lawyer
i am impressed by microsoft's legal shop, particularly the really pathbreaking work that they did to go after spammers and people who are coming after them on the net with civil theories that dated back to probably 15 century english common law. it was quite impressive to see such ancient doctrines apply to such a new problem and they think the microsoft complaints in that area have really set a model not only for the rest of the corporate sector in that area of law but even for government enforcement in the area of law. so you come from a good place, and welcome. >> thank you very much, chairman whitehouse. again my name is pamela passman and i'm the ceo of the center for responsible enterprise in trade, create.org or i appreciate the opportunity to
testify. c.r.e.a.t.e as a nonprofit dedicated -- intellectual property theft including trade secret theft. we provide resources to companies, large and small that help them assess their risk and develop strategies to protect their trade secrets and other ip assets. both within their organizations and in their supply chains. in today's integrated global economy, companies that succeed in turning their knowledge and know-how into competitive advantage are the ones that will create new jobs and drive economic growth. increasingly, companies rely on trade secret laws to protect its knowledge. through tremendous value of trade secrets also makes them prime targets for theft. create recently teamed up with pricewaterhousecoopers to assess the economic impact of trade secret theft and devised a framework for companies to mitigate threat. a copy of the trend in report --
content report is attached my written test when. the report makes clear that the problem of trade secret theft is massive and influx material damage on the u.s. and other economies. if we are to energize our economies by enabling innovative companies to protect their trade secrets, we need to focus on two key goals. first, we need to incentivize companies to take proactive measures and implement best practices to secure their trade secrets on the front end, both within the own organizations and in their supply chain. second, we need a consistent predictable and harmonize legal system to provide effective remedies when a trade secret theft has occurred. trade secret theft occurs through many avenues and companies need different tools and strategies to protect against each type of threat after. businesses need to be particularly cognizant of risks
that arise in your supply chain. the growth in recent years of extended global supply chain comprising hundreds or even thousands of suppliers has brought tremendous benefits and given many firms an enormous competitive edge. companies using extended supply chains often must share confidential and highly valuable business information with their suppliers. which may be located in a different country with different laws and different corporate norms. in the face of this reality it is absolutely essential that companies implement effective strategies to protect trade secrets, not just within their own four walls, but with their suppliers as well. in the create reportedly recommended a 55 step approach for safeguarding trade secrets and mitigating potential threats. we suggest that companies come one, identify and categorize their trade secrets. two, conduct a risk assessment. three, identify the most
valuable trade secrets to their operation. four, assess the economic impact of losing those secrets, and five, use the data collected to allocate resources and strengthen existing processes for protection. create recently created -- created by the program with more than 60 companies in countries around the world that help them assess vulnerabilities and different procedures to mitigate threats. based on a pilot program we just launched create leading practices, a service designed to help companies improve amateur there management system for ip protection and for anticorruption. unfortunately no amount of protection can completely safeguard all trade secrets from theft. companies also need a legal system that provides predictable enforcement and meaningful remedies against bad actors. recent high profile criminal enforcement actions are promising, and i applaud you,
chairman whitehouse and ranking member graham, for your focus on law enforcement. i'm also encouraged by the efforts of senator coons and had two great harmonize system for owners of trade secrets that will serve as a model around the world. the problem of theft that happened entirely overseas highlighted by senator flake's legislation is worthy of further study. governments and companies both played a role in approving protection for trade secrets. in our view companies would benefit from taking a more proactive role in assessing vulnerabilities and employing best practices to manage the risk. they also need an effective legal system which to enforce the rights when their know-how has been misappropriated. thank you calling this hearing and for giving me the opportunity to testify. i look forward to your questions. >> thank you, our next witness is due greenblatt was the president of marlin steel wire products in baltimore. just owned it since 1998.
the company exports baskets and sheet metal fabrications to 36 countries and has been recognized as one of the 5000 fastest growing companies in the united states for each of the last two years. mr. greenblatt serves as an executive board member of the national association of manufacturers and as chairman of the board above the national alliance for jobs and innovation and other regional manufacturers to america also member of the commission on manufacturing competitiveness as well as the governors international advisory council. we welcome you here, mr. greenblatt. please proceed. >> thank you, chairman whitehouse, senator hatch, members of the subcommittee on crime and terrorism. thank you for this focus on the critical challenge of trade secret theft and the opportunity to justify today. as you mentioned my name is drew greenblatt. i'm the president of marlin steel, based in baltimore city, a leading manufacturer of custom our baskets and wider forms and sheet metal fabrications. we make everything in the u.s.a.
i'm very proud to report that we also export to 36 countries and my favorite country that we export to is china. we cater to the automotive and medical and pharmaceutical industries. on here for three reasons. number one, trade secrets are important not just for manufacturers that are big but also are small manufacturers like myself. number two, america's trade secret laws and policies must keep pace with today's threats which increasingly are not only interstate but our international threats. number three, manufacturers need your help to effectively and efficiently protect and enforce trade secrets. we need to secure strong commitments in our trade agreements. like some other manufacturers, marlin steel impedes on the global economy. we succeeded to investing in ideas and innovations and the hard work of our dedicated employees. when i bought marlon in 1998 we were a local business and we
made commodity bagel baskets, 18 it was, $800,000 a year in superclass to it hit almost 500 million -- we are proud of the national association of manufacturers. we average about 40 members, 40 employees and the national association of manufacturers and with 12,000 members. i'm also the cofounder and chairman of the national alliance for jobs and innovation, 380 members. we are working hard to strengthen it a protection of trade secrets and intellectual property rights. we want to level the playing field for manufacturers and businesses throughout the united states. trade secrets are more important than ever. they include things like drawings, proprietary manufacturing processes, software, formulas, all of these things are very valuable to the nation. $5 trillion for public companies
and even more when you include small companies. small companies, our secret sauce is those trade secrets. that's our intellectual property. we leverage the expertise of our employees, 20% are degreed mechanical engineers. they come up with specific client performance characteristics for our baskets that make us unique and different than our chinese competitors. some people think that almost 3% of our gdp is lost to these trade secrets being something. in our grandparents day, trade secrets were stolen by individuals who are across town that was steal some of the customer list. now it could be done on a thumb drive and it could be sold to governments and chinese companies across the world. these cyber incursions are very threatening to us. we have lasers in our factory, robots. if they could hack into a system they could manipulate our equipment and deposit hurt our employees are to be devastating to us. thing i'm most proud about,
we've gone over 981 days without a state incident. in some foreign national were to break into our system in italy our system, they could hurt our team. we're doing everything we can to harden our network. we spend so much money hardening our network that we could hire another unemployed steelworker to fill that job rather than spending all this money on these activities. the good news is washington's turn to recognize this problem. we need washington to do three things. first of all we need you to have strong operational collaboration between the federal agencies. we cannot have the silo approach we have right now. we need the fbi a whopping with justice department operate with customs cooperate with tsa. we all have to work together. number two, we need access to federal civil enforcement for trade secrets theft, well conceived legislation like the defendant trade secret act recently introduced by senator coons and senator hatch. this will give us the ability to
pursue people in the federal level not on a state level. finally, we need to meet the global challenge of trade secret theft with global solutions, good trade agreements to stop these thefts. in conclusion, chairman whitehouse and senator hatch, trade secrets are vital for manufacturers small and large. america's trade secret laws and policies must keep pace with today's threats. manufactures need your help to ensure that they can effectively and efficiently protect and enforce their trade secrets. i applaud your attention to this critical challenge and your focus on solutions with strong global partnerships and closer collaboration between federal agencies and between government and business, and with the improvements to the fewest laws, including federal civil enforcement, we can never relent back. we desperately need it now. thank you for the opportunity to testify this afternoon. i look forward to answering your questions.
thank you. >> thank you, mr. greenblatt. our final witness is douglas norman, the vice president and general patent counsel for eli lilly and company. he serves as a member of the board of intellectual property owners association and as chair of the national association of manufacturers subcommittee for intellectual property. mr. norman has previously served as the 2002 co-chair of the intellectual property and antitrust task force for the united states council for international business. welcome, mr. norman. please proceed. >> good afternoon, chairman whitehouse, mr. hatch and other members of the subcommittee. thank you for the opportunity to testify today. on an issue of great importance not only to my company and not only to my industry but to all segments of the american economy. eli lilly and company was founded and is headquartered in indianapolis, indiana, on may 10, just last saturday, eli lilly so but it's 138th
birthday as a u.s. company. our mission is to discover and develop medicines that help people live longer, healthier and more active lives. are major areas of innovation include therapies of cancer, diabetes and mental illnesses. to fulfill this vision, lily must rely on intellectual property protection that includes patents, trademarks and trade secrets. unfortunately, like too many of america's leading innovator firms, lilly has recently the victim of trade secret theft. lilly as a member of the tech trade secret coalition a cross sector group of companies that support they harmonized federal civil remedy for trade secret misappropriation. we are pleased to support the defendant trade secret ask as 22 which would accomplish this objective. we thank senators coons and hatch for the leadership and we are also encouraged i don't work, chairman whitehouse and
ranking member graham, to ensure law enforcement has the tools it needs to prosecute trade secret theft and we appreciate the efforts by senator flake to highlight the continued problem of trade secret theft occurs abroad. the bipartisan interest in trade secret protection evidenced by this committee's work is important to our shared objective of improving the effectiveness and efficiency for trade secret remedies against trade secret theft appropriation. trade secrets are an essential form of intellectual property and part of the backbone of our information-based economy. whether a major pharmaceutical firm like eli lilly, or a startup software company, your trade secrets are a big part of what set you apart in the marketplace. their protection is vitally important to maintaining a competitive edge in keeping workers on the job. unfortunately, companies that are creating jobs in america are increasing the target for sophisticated efforts to steal proprietary information, harming
our global competitiveness. trade secrets are particularly vulnerable to theft given the rise in global supply chains and the rapid technical advances. a that can come through cyber attack, voluntary or involuntary disclosure i an employee, or by a joint venture partner. the economic espionage act makes the theft of trade secrets a federal crime and provides civil relief. the tools these use inheritance to steal american trade secrets are growing more sophisticated by the day, however. our laws must keep pace. bea as a cruel statute necessarily has limitations. but we are very much appreciate the cooperation we get from federal law enforcement, the fbi and the department of justice have limited resources and would never be in a position to bring charges in all cases of interstate trade secret theft. state laws provide an important right for trade secret owners to bring a civil action for relief.
state trade secret laws developed and made sense at a time when misappropriation was largely a local matter. for countries that operate across state lines and have their trade secrets threatened by competitors around the globe, the risk a loss is inefficient and often inadequate. is also inconsistent with how other forms of intellectual property are protected. trade secret theft it is increasingly likely to involve the movement of the secret across state lines and requires swift action by courts to preserve evidence to protect their trade secrets and being divulged. this is particularly to win the theft is by an individual looking to flee the country. wants a trade secret has been divulged was made known to the competitor trade secret protection may be lost for ever and the harm from disclosure is very often irreparable. we are pleased of the defendant trade secrets act would address these limitations and provide trade secret owners with the same ability to enforce the rights in federal court as owners of other forms of intellectual property have. the breadth of support for the
legislation from companies focus on diverse areas such as software, biotechnology, semiconductors and medical devices, agriculture and apparel demonstrate the importance of a harmonized federal civil remedy. the companies that have already indicated their support for s. 26 to seven often disagree on other areas of intellectual property protection that we are united on this front. we also look forward to working with chairman whitehouse and ranking member graham on ensuring law enforcement has the tools it needs to prosecute trade secret theft. similarly we look for to working with senator flake and agree that it's important to study ways in which we can address overseas that effectively. in conclusion, american companies are competing globally and our knowhow is subject to theft everywhere. a national solution that provides predictable trade secret protection and enforcement is therefore essential to our global competitiveness. the defendant trade secret act will establish the gold standard for national trade secret laws globally and serve as an
important base for international harmonization efforts. we urge the committee to consider this legislation and for all senators to support it. and get again for the opportunity to testify today. i look forward to your questions. >> let me welcome senator hatch in senator coons to the hearing. and before i turn to them for their questions, let me ask in this consent that chairman leahy's statements be put into the record which will be without objection. and let me ask each of you just very simply and quickly, using your own words and your own experience, explain what you think the scope is of this problem for our country and its industries. starting with mr. hoffman. >> it is a tremendously big problem for us as a company. and i think more broadly as an industry because of so much of
our intellectual property is protected as trade secrets. and right now a lot of those are very probable considering the changing landscape on sophistication of the means of which are intellectual property can become an trade secrets can be obtained. so anything that helps to improve law enforcement ability to protect our trade secrets and allows us to be more secure and keeping the secret so they are still valuable is very much appreciated by boeing. >> from your experience, the scope of the problem? >> well, with companies having almost 75% of their value intangible assets, including trade secrets, the problem is quite significant. in the create pwc report we attempted to put a figure to the
magnitude of the problem looking at the different threat actors that are involved, looking at the fact that u.s. companies other than advance becomes a reliable distributed supply chains increasingly and we look at other a list of economic activity as a proxy for this. since it's a figure that is the difficult to get one's arms around because companies themselves don't know the magnitude of the trade secrets they have as well as when there is a trade secret theft. we looked at other examples of illicit activity, corruption, money laundering, similar kinds of threat actors, and came to a figure of one to 3% of gdp. quite significant. >> thank you. mr. greenblatt? >> this problem is out of control. we need your help. we are being attacked daily. what this will have come if we can get this legislation enacted, this will save jobs.
in baltimore city, unemployed steel workers will be employed. we are getting things stolen left and right. we need your help. >> mr. norman? top that for clarity by the way. >> i will try to add some clarity myself. the issue is enormous. i can speak on behalf of pharmaceutical firms that spend billions of dollars every year doing research and development. as we move forward and try to develop new life-saving medicines, we intend only build chemical platforms and pharmaceutical platforms in hopes of reaching a point where we can't apply for patent. what we are seeing our numerous instances where interlopers are stepping in and trying to steal our trade secrets on our formula prior to the time we can reduce those into a patent application. it very often may take two,
three, perhaps longer, two or three years or longer to do enough research to get to the single molecule that we think will be able to carry on into clinical trial. if we lose the trade secret and all of that formula prior to the time we can reduce that to a patent application, the loss is a revocable. so we may spend 10, 20, $30 million building a chemical platform a rich diversity of a number of compounds and did anyone of those is stolen from us prior to the time that we can't obtain a patent on it, then it is lost forever. and, therefore, the public gets to enjoy the fruits of that research once it's gone. >> thank you very much. senator hatch. >> thank you, mr. chairman. and i should say both you and senator coons that before you got here, your names were sung
with praise over and over again for the legislation. it was almost as if you're some of your by those voices. >> that's always unusual. [laughter] we are happy to have you all here. you are all experts in your field to let me ask mr. norman and mr. hoffman to respond to this one, and that is under u.s. law, protection for trade secrets are already some of the most robust in the world. and we're hoping to make those provisions, protections even stronger. but protecting trade secrets in numerous countries is a challenge it seems to me. facing many transnational companies, something i'm very concerned about. now, mr. norman and mr. hoffman, how will changes that would make in u.s. law have an impact either positive or negative on what other countries are doing
in this area? and we need to be careful here? mr. norman, you can go first. >> sure. thank you. again for the legislation is introduced your we greatly appreciate it. we greatly appreciate your leadership. the instances of what it would do on a positive standpoint is that we believe the legislation to obtain a federal trade secret remedy, particularly the ability to seek and export a seizure of stolen materials -- ex parte, for the disclosure or divestment of that information broadly would be a very positive gold standard for future discussions on harmonization and trade secret laws around the world with our major trading partners. it's important i believe to get beyond the state trade secrets
laws which are often a bit unwieldy and difficult to enforce across state lines simply because the procedures are not always set up to work very well along those lines. but with a federal standard with the appropriate kind of ex parte control, i believe we can show the rest of the world why the gold standard would look like as far as giving us the rights on our own to take a private civil action and protect our trade secrets. >> thank you. >> thank you. >> you care to add anything? >> yes. i totally agree with my colleague. any opportunity for our trade negotiators to be able to point to improvements in trade secret law protection in the united states, and thus strengthen the laws outside of our borders with global companies such as ours, will be very helpful to protecting our trade secrets. >> let me ask a question for the whole panel.
that is, trade secrets also seem to be a lot more difficult to protect than patents. i understand that there may be industry best practices and model policies but i imagine these vary widely based on the industry and type of process or information you are trying to protect. so i'm very interested in as it has to go matter how do you determine what measures are reasonable to protect your trade secrets? okay, mr. hoffman. >> well, when it comes to trade secret versus patent, we actually based upon the reverse engineering capability of the innovation, but once we decided to the trade secret route we have to have the processes and the systems in place in order to assure that those secrets, those trade secrets are secure. as mentioned previously, 60% of
what we sell we buy from others as a company. so the sharing of our intellectual property across our supply chain domestically and internationally is an area where we are to be very careful that they have the same type of procedures in place and they will protect our intellectual property at the same level. >> yes? >> in our work with companies around the world we found that this is something that's not very mature inside their businesses or with their supply chain partners. so in the create work we laid out a five step framework for companies to begin to get their arms around how to best manage their intellectual property. really first been able to identify and categorize what you have and where it is in a couple he is critical whether a small company or a large company with global operations. we also recommend companies conduct a risk assessment and it didn't find who are the primary threat actors, who is interested in their trade secrets, into intellectual property and their potential vulnerability in their policies an and procedures, in
their internal controls, really looking inside the company and in the supply chain it can also identify those trade secrets that would have the greatest impact on the company's operations and business. also look at the economic impact of a loss of a trade secret, understand the magnitude that will have on their business. and, finally, taking all of this information and allocating resources to better protect your trade secrets, thinking of it as an investment, not just a cost. >> senator coons. >> thank you, senator whitehouse. i'd like to thank you for cheering this hearing and for the great work that you and senator graham have done it to make sure that we protect america's intellectual property. we have heard from an array of witnesses today, the compelling picture of what's really at stake here, of the $5 trillion of value held in america's intellectual property and in particular in the form of trade secrets. we have criminal law
prosecutions for the protection of trade secret theft, the economic espionage act is a good platform, a good beginning but as we've heard from you today as witnesses there are significant gaps and i applaud the chair today, senator whitehouse and senator graham, for the hard work and improving efforts to deal with that. the department of justice has many priorities and limited resources and so it's unsurprising to me that they were just 25 trade secret cases brought last year. before he leaves, i need to say my profound personal thanks to senator hatch for being a great partner and a good leader on this. >> same here. this young man hasn't done a very good job. >> even got a young man out of it las. [laughter] >> as a former intern for this committee i will say that i never imagined would be a day when senator hatch would be padding on the shoulder and sang other 40 passing a bill with this nice young man.
one of the time was mostly passing copts of coffee. it is a tremendous sense of satisfaction that i've gotten through working with senator hatch and what eli lilly and the number of other companies represented here today, and i'm grateful to the national association of manufacturers and the coalition for the protection of trade secrets, to protect trade secrets coalition for the very able and valued input as we have crafted this bill and trying to get to a place that make sense, and i can have, can help stem the gap in u.s. law to ensure that we really vigorously defend trade secrets. let me ask basis of questions quickly to the panel if i might be part run out of time. first, if i might, mr. hoffman. boeing does business globally as your testimony demonstrates. most of the significant threats to u.s. trade secrets today originate from other countries from around the world. can you speak to respect for trade secrets have buried around
the world and out our laws domestically and what we might enact in terms of mesh to strengthen our domestic laws could then influence the protection of usip international? >> i'd be glad to. thank you for the question, senator coons. when you look at trade secret theft regardless of whether it's coming from domestic or international, it hurts boeing, it hurts other companies. i think the best thing we can do as a country is to set the standard and provide the tools necessary for efficient and effective protections of our trade secrets, and get to stand at your trade negotiators to press the issue with their counterparts. >> i couldn't agree with you more and i appreciate the response. if i might, mr. greenblatt, marlin steel, small manufacturers that escrow significant under your leadership. trade secret theft can pose an existential threat, if they did succeed in stealing as you put
your secret sauce from a can literally mean the end of the visit -- >> senate coming back in session now. you see the rest of this hearing on our website, c-span.org. members will vote to confirm several nominees, but a vote to limit debate on a substitute an end to a bill extending expired tax breaks. live coverage on c-span2. neither side yielding tiernlg the time will be equally divided.
ms. hirono: madam president ask unanimous consent to yield back all time. the presiding officer: without objection, time will be yielded back. the question now occurs on the marquez nomination. ms. hirono: i ask for the yeas and nays. the presiding officer: is there a sufficient second? there appears to be a sufficient second. the clerk will call the roll.