Foreign Economic Espionage in Cyberspace/Foreign Laws Could Enable Intellectual Property Theft

by the National Counterintelligence and Security Center

Foreign Laws Could Enable Intellectual Property Theft

New and enhanced cyber, national security, and import laws in effect in foreign countries are posing an increasing risk to U.S. technology and propriety information. For example, in 2017, China and Russia aggressively enforced laws that bolstered their domestic companies at the expense of U.S. companies and also might allow their companies access to U.S. intellectual property and proprietary information.

In 2017, China put into effect a new cyber security law that restricts sales of foreign information and communication technology (ICT) and mandates that foreign companies submit ICT for government-administered national security reviews. The law also requires that firms operating in China store their data in China, and it requires government approval prior to transferring data outside China. The U.S. Chamber of Commerce has gone on record to explain that if a foreign company is forced to localize a valuable set of data or information in China, whether for research and development purposes or simply to conduct its business, it will have to assume a significant amount of risk. Its data or information may be misappropriated or misused, especially given the environment in China, where companies face significant legal and other uncertainties when they try to protect their data and information.

===Required Steps for U.S. Companies to Do Business in China===

1. Pass National Security Reviews for Technology and Services
2. Store All Data in China
3. Form Joint Venture to Open Data Center
4. Obtain Government Approval for Data Transfers
5. Buy Government-Approved Encryption and Virtual Private Networks (VPNs)

► China has Access to U.S. Intellectual Property and Proprietary Information

Similarly, in recent years Russia has dramatically increased its demand for source code reviews for foreign technology being sold inside the country. Russia’s Federal Security Service (FSB), associated with economic espionage missions in the past, serves as the authority charged with directing these source code reviews and approving the sale of technology products and services sold inside Russia. High intelligence threat countries, such as China and Russia, could exploit these laws to significantly improve their access to the intellectual property of foreign companies operating in their countries and subsequently share this sensitive information with domestic firms.