Deputy Attorney General James M. Cole Speaks at the
Protecting Michigan’s Technology

Thank you, Barb, for that kind introduction. Good afternoon. I am very pleased to be here today with the State of Michigan ’ s chief executives for information, technology and security, as well as leaders in industry, government and academia who are creating the technology that is powering America in the 21 ^st Century.

Now more than ever, innovations in technology and manufacturing are key to American prosperity and Michigan has long been at the forefront of design, engineering and manufacturing. We at the U.S. Department of Justice, want to do all that we can to protect American businesses against criminals who seek to steal and illegally profit from your creativity and innovation.

American companies make some of the most sought after products in the world. Consumers benefit from having ready access to the most cutting-edge, high quality products available; and it helps to create jobs and strengthen our economy. At the same time, this also makes our companies an ideal target of intellectual property crime.

While imitation may be the highest form of flattery, American industry isn't looking to be flattered by thieves engaged in illicit competition. Industry seeks a fair and level marketplace where American innovation can thrive.

Rather than take the time to research and develop their own ideas, all too often competitors, and even some foreign state actors, seek to steal proprietary designs, systems, processes, and formulas from American manufacturers, who invested years and millions of dollars into the research and development that it takes to create smarter cars, better computer technologies and more sophisticated military equipment.

Ironically, new technology itself has made it easier than ever to steal trade secrets. A well-placed rogue employee can capture a company ’ s highly-protected crown jewels – on which its profits and jobs depend -- on no more than a thumb drive and instantly transmit it to a foreign competitor from their home computer.

Not only are we seeing the theft of trade secrets, but we are increasingly seeing counterfeit auto and military parts. Counterfeit parts endanger consumers, put our troops at risk and undermine our national security. They erode profits for American manufacturers, and they can cost hard-working Americans their jobs. A recent report by the Senate Armed Services Committee found the problem of counterfeit military parts to be widespread in the defense supply chain, finding 1,800 cases of suspected counterfeit parts over a two-year period, including parts for Navy helicopters, military cargo planes, and anti-submarine aircraft. Among the counterfeit parts were electronic components that help pilots avoid hazards and identify targets at night, as well as an ice detection module critical for the safe operation of certain military planes. In one instance, a part literally fell out of its socket and was found rattling around inside the module. Not only do these substandard parts risk the safety of our service men and women, they also drive up the cost of maintaining military equipment. The cost to fix computers or helicopters or planes that contain counterfeit parts has cost American taxpayers millions of dollars.

These are just some of the reasons why Attorney General Holder has made protecting intellectual property one of the Department ’ s top priorities. As Deputy Attorney General, one of my duties is to serve as the chair of the Department ’ s Task Force on Intellectual Property. The Attorney General recognized that the rise in intellectual property crime in the United States and abroad threatens not only our public safety but also our economic well being. Because of this, he created the Department ’ s Task Force to confront this threat with a strong and coordinated response. Task Force members include senior representatives from the office of the Attorney General, Office of the Associate Attorney General, Criminal Division, Civil Division, Antitrust Division, Office of Justice Programs, Executive Office of United States Attorneys, Attorney General ’ s Advisory Committee, Office of Legal Policy and the FBI. Through the coordination of the efforts of Task Force members, we can identify and implement a multi-faceted strategy with our federal, state and international partners to effectively combat this type of crime.

The Task Force monitors and coordinates overall intellectual property enforcement efforts at the Department, with an increased focus on the international aspects of IP enforcement, including the links between IP crime and international organized crime. In particular, our Task Force mission is focused on four areas. These include: (1) monitoring and coordinating the Department ’ s overall IP enforcement efforts; (2) increasing the focus on international IP enforcement; (3) prioritizing efforts to develop evidence of the link between IP crime and international organized crime; and (4) expanding civil efforts through both policy/legislative development and increased enforcement.

In addition, the Task Force four topical areas of focus have been: (1) Health and Safety; (2) Theft of Trade Secrets and Economic Espionage; (3) Large-Scale Piracy and Counterfeiting; and (4) links to Organized Criminal Networks. As a result, our enforcement efforts at the Department are more vigorous, more strategic, more collaborative, and more effective than ever before.

The Department has also increased its resources so that we currently have in our arsenal:

• Up to 40 prosecutors and four computer forensics experts in the Criminal Division ’ s Computer Crime and Intellectual Property Section, which guides the Department ’ s overall IP enforcement strategy and prosecution efforts;
• 25 Computer Hacking and Intellectual Property – or, “ CHIP ” units – located in U.S. Attorney ’ s offices throughout the country, some who are here participating in the Conference today;
• 51 highly trained FBI IP Special Agents;
• A network of more than 280 specially trained CHIP prosecutors;
• A thriving international program that provides operational assistance to increase detection and enforcement capabilities in targeted countries and regions worldwide; and
• Ongoing partnerships with a broad range of IP-rights stakeholders.

Why are we dedicating so many resources to this area? Because it is clear to us at the Department of Justice: IP crimes are anything but victimless. For far too long, the sale of counterfeit, defective, and dangerous goods had been accepted as “business as usual.” But these and other IP crimes can destroy jobs, harm our economy, suppress innovation, and jeopardize the health and safety of consumers. These activities also fund dangerous – and even violent – criminal enterprises and organized crime networks. That is why, through the IP Task Force, it is our mission and our commitment, to protect our nation’s economic and national security as effectively as possible.

Perhaps our most effective and primary tool is vigorous criminal prosecution. Let me tell you about just a few from the last few months:

In August, a former Bridgestone research scientist was charged with eight counts of theft of trade secrets and seven counts of making false statements to federal agents. The Bridgestone facility in Akron, Ohio, where the defendant had been employed, was responsible for conducting research and development for various product lines, including tire, rubber, and other polymer-related products. The trial is scheduled for this month.

Last Spring, in New Jersey, the Department charged 29 defendants for their alleged roles in massive, international conspiracies to import hundreds of millions of dollars in counterfeit goods from China. On a single day, 20 coordinated arrests were made in four U.S. states and the Philippines.

The Department also continues to work with the Department of Homeland Security on Operation in Our Sites, an ongoing, multi-year law enforcement initiative that targets businesses engaged in online counterfeiting and piracy and is designed to disrupt infringing sites and to educate and protect consumers. Through Operation in Our Sites the Department and law enforcement has seized over 839 domain names and replaced them with a law enforcement banner which has been viewed over 103 million times.

In January, the Department unsealed an indictment against seven individuals and two corporations for running an organized criminal enterprise engaged in massive online piracy, through the website MegaUpload.com and other sites. Megaupload is alleged to have generated $175 million in criminal proceeds and caused over $500M in harm to copyright owners; and they boasted being responsible for 4 % of all traffic on the Internet.

And of course, through the efforts of the talented prosecutors in the USAO here in Michigan, we have achieved numerous significant successes prosecuting intellectual property and computer crimes.

For example, a former employee of Ford Motor Company, headquartered in Dearborn, was sentenced to six years in prison for stealing trade secrets to benefit a Chinese competitor. Before leaving his job at Ford to work for a Chinese company, the defendant copied more than 4,000 documents onto an external hard drive, including sensitive design documents pertaining to electrical systems, which he took with him to China.

In another case, employees of Metaldyne Corporation, headquartered in Plymouth were convicted and sentenced to prison for conspiracy to steal proprietary information to assist a Chinese competitor. The proprietary information involved the manufacturing process for powdered metal parts.

In a third case, owners of an auto parts supplier in Chesterfield Township were convicted for their roles in a scheme to substitute cheap, substandard materials for use in seat belt assemblies, putting consumers at risk.

In a pending case, a husband and wife have been charged with conspiracy to possess trade secrets from General Motors. The indictment alleges that one of the defendants, while employed by General Motors, provided GM trade secret information relating to hybrid vehicles to her husband for the benefit of a foreign competitor. The trial in that case is set for next month.

These actions are just a few illustrations of our vigorous efforts to enforcement intellectual property laws here in Michigan and throughout the United States. And they send a message to would-be offenders that we will aggressively pursue those who would commit these offenses.

Although the U.S. Attorney’s Office and the Department of Justice have done much to protect our nation’s intellectual property, I recognize that there is more work to be done.

As our nation continues to recover from once-in-a-generation economic challenges, safeguarding intellectual property rights – and protecting American innovators and entrepreneurs and the jobs they create – has never been more important. And as technology makes it easier for criminals to intrude into our computers, copy our designs, and steal our intellectual property, we are committed to doing all we can to stay one step ahead to protect American innovation.

It is important that we in government, academia and the private sector work together in this effort.

There’s no question that the Justice Department’s efforts – and this Administration’s dedication – to combating IP crimes has never been stronger. But I also recognize that government can’t win this fight – and keep pace with today’s IP criminals – alone.

We all have a part to play. We, at the Department, must continue to serve as your partner in identifying, investigating and prosecuting these criminals. We’re seeking new ways to share information – and to leverage expertise – with a variety of private sector partners, as well as government and law enforcement officials across the country. Industry has an important role in serving as the first line of defense. We know some of the tactics that are frequently used – for instance, we know that trade secrets can be stolen by aggressive targeting and recruiting of insiders working for U.S. companies and research institutions; and we know that our IP is at risk, from foreign competitors, foreign state actors, and criminal organizations who conduct economic intelligence through operations involving bribery, cyber intrusions, theft, dumpster diving in search of discarded intellectual property or prototypes, and wiretapping.

The best way to avoid theft is for companies, start-ups, academic institutions, and anyone possessing valuable intellectual property to take some basic steps to protect their trade secrets. Make sure you have systems installed to prevent someone from hacking into your IT systems and stealing your intellectual property. Make sure access to your most valuable IP is restricted to only those employees that need to have such access. Make sure you use encryption in sending electronic files within and outside the company. And make sure to regularly change password access to your computers on a regular basis.

These are easy, yet effective measures to take to begin to solve this problem. And, importantly, if you have any concerns that your IP has been compromised, let us know right away. The earlier we get involved, the more we can do to help you.

The fact is that we’ll never be able to prosecute our way out of this problem, or meet our goals and significant responsibilities on our own, separately. It’s only by working together – a partnership with the Department of Justice and our partner agencies; industry leaders and security experts, like you, in this room; law enforcement officials at every level; and with international allies, IP crime victims, and members of the public – that we can anticipate, understand, and overcome the new methods and technologies being employed by those who seek to profit from the innovations of others.

We appreciate opportunities like today to share ideas with each other to help us in our common mission. Thank you for all you do to create Michigan’s technology, and we at the Department will continue to do all in our power – working with you and for you – to continue protecting it.