The history of corporate espionage in the United States is not a recent development. At the beginning of the nineteenth century, the British textile industry was by far the largest in the world and was largely driven by its technological superiority especially the “Cartwright Loom,” which was considered the crown jewel of that industry. Using the cover that he was in Scotland for “reasons of health, Francis Cabot Lowell succeeded in obtaining the detailed plans for this loom despite the efforts by the British mill owners to keep it secret. Returning home to Massachusetts in 1813, Lowell was able to replicate the workings of the loom and establish a textile business in what is now, Lowell, Massachusetts, that was named after him. Lowell’s success, however, did not stop with acquiring the most valuable trade secret of the British textile industry but extended to making it more difficult for the British textile industry to compete in the United States. In 1816, Lowell convinced Congress to impose a high tariff on each square yard of imported cotton.
Over 180-years later with the cold war coming to an end, Congress realized that the U.S. could no longer depend primarily on military superiority to continue to be a superpower, and that economic superiority was becoming as important as military superiority. Further, with the beginnings of the rise of the digital age, proprietary information became the core asset of many companies, while at the same time becoming far easier for increasing mobile employees to steal this information. Disloyal employees no longer had to spend hours copying confidential documents and risk being caught removing the documents, but could simply download huge amounts of information on computer disks with little risk of being caught. In recognition of this need to better protect intellectual property, including trade secrets, in 1996 Congress enacted the Economic Espionage Act (“EEA”). The EEA criminalized the misappropriation of trade secrets, prior to this, trade secrets had only been protected through a patchwork of state laws. Congress intended for the EEA to address both the general need for a federal criminal deterrent against trade secret theft and to prevent industrial espionage by foreign states. In 2016, Congress enacted the Defend Trade Secrets Act that provided for a civil cause of action for theft of trade secrets.
Until about 2010, the number of cases brought by the United States under the EEA was broadly focused without any apparent pattern to the type of defendants prosecuted. However, since then things have changed and a majority of the defendants charged under the EEA have some connection to China or have a Chinese surname. From about 1997-2009, 17% of the defendants charged under the EEA apparently were of Chinese descent. However, since then a clear pattern has emerged. After 2009, the percentage of Chinese espionage defendants has surpassed 50%. This statistic is not that surprising since there is little doubt that the Chinese government and Chinese companies have turned to the theft of U.S. intellectual property as a means to better their technology, much like Lowell did in 1813. According to the author, “Chinese leaders are open about their interest in developing technology in strategic sectors by any means possible.”
Further, in response, the United States increased its focus on Chinese economic espionage. For example, on November 5, 2018, the Department of Justice created a “China Initiative” targeting economic espionage committed by companies based in the People’s Republic of China, and individuals having a connection to that country. Then AG, Jeff Sessions described the importance of technology to the United States, which he claimed has given the U.S. “advantages both economically and militarily that have directly benefitted the daily lives of the American people.” He asserted that while China committed publicly in 2015 “that it would not target American companies for economic gain,” China has not kept this commitment. He then asserted that “enough is enough” and that “China cannot be a safe haven for criminals who run to China when they are in trouble, . . . .”
The Scientist and the Spy by Mara Hvistendahl recounts the FBI’s efforts to capture a “Chinese spy,” who was after hybrid seeds planted in Iowa cornfields. The story starts with recounting the questioning of a well-dressed Chinese man by a deputy sheriff from a small county in Iowa after he was spotted in a rural cornfield in an Iowa community that is 97 percent white. As recounted by the author, according to one Iowan, “A Chinaman in Redfield Iowa, would stick out like a sore thumb.” The book also recounts that the school teams until 1980, in the Iowan town of Pekin– founded by settlers who believed that they could reach China by digging down from the town—were called the “Chinks.” The Chinese man, Robert Mo, and his two companions, who were also questioned by the deputy sheriff, were let go with a warning. However, the matter did not end there, the FBI became involved after Mo’s name came up in other incidents in rural communities in the Midwest.
Hvistendahl soon makes clear that Mo and his colleagues were after hybrid corn seeds developed by U.S. companies through both legal and illegal means. The field that Mo was caught in was planted with genetically modified seed lines developed by Monsanto. As the book notes, the development of hybrid corn in 1926 by Henry A. Wallace opened an incredibly lucrative business for seed companies, which became Pioneer Hi-Bred , and later DuPont Pioneer. Prior to then, farmers saved corn seed at harvest to replant the next year. The hybrid seed that was created by crossing two inbreds, or pollinating the female part of one inbred with the male part of another, could produce a crop that was both predictable and robust. The new hybrids were much more resistant to drought and they produced a uniform height that made them easier to harvest. In the 1970s, Monsanto and DuPont that were then primarily chemical companies created varieties that could withstand certain weed killers or were resistant to pests. For example, Monsanto sold the weed killer Roundup which killed weeds but didn’t affect the genetically engineered corn hybrids. Because Monsanto and DuPont have purchased many of the smaller seed companies and hybrid seeds produce sterile plants, similar to a mule, farmers must purchase seed every year from an increasingly shrinking number of seed companies, generating huge profits for the remaining companies.
By far, the most well-known example of a trade secret is the ingredients and process for manufacturing Coca-Cola. Because Coke has been able to keep this recipe secret for over 100 years no competitor has been able to replicate the exact taste of Coke. Nobody who has ever tasted Pepsi can claim that it tastes exactly like Coke for better or worse. However, the broad definition of what constitutes a “trade secret” means that almost any confidential information can be considered a trade secret so long as the owner has taken steps to keep it secret. This can include hybrid corn seeds, which are extremely valuable to the seed companies.
According to the author, agriculture understandably is one of many areas in which China is seeking rapid advancement, both because of the lucrative nature and the need to increase farm yields to feed its large and increasingly urban population. In the early 2000s, there were approximately 8,700 Chinese seed companies and “none of them had successfully managed to create seed lines that rivaled those of the international seeds outfits.” Chinese leaders “equated food security with national security.” Accordingly, Chinese companies were driven to obtain hybrid seeds even if by illegal methods. “Real research takes time. Theft is expedient—especially if there is a little chance of getting caught,” Hvistendahl writes.
That’s where Robert Mo came in, who comes across as somewhat of a sad sack of a person, intelligent extremely naïve, and resentful that his parents had given him a name that his classmates could easily distort to mean “No Heaven, No Earth.” Mo moved to the U.S. from China in the late nineties with his new wife so he could pursue a second Ph.D. at Kansas State University. However, even after this, he was unable to find work in the U.S. so even though his experience was in a completely different field, and had no experience with agriculture, he accepted a job at DBN, a Chinese agriculture company. The job was arranged by his sister who was married to the chairman of DBN and is one of the richest men in China. Mo’s role was initially to source animal feed in the U.S. but soon was responsible for helping to develop DBN’s seed-breeding program.
This program in the U.S. mostly consisted of Mo and colleagues driving around the Midwest collecting seeds from farmer’s fields–shortly after planting–that they knew had been planted with genetically modified seeds. It also included buying seeds from suppliers, who were supposed to ensure that the seeds were used only for that year’s harvest, but didn’t always so. Mo sent the seeds to DBN in China for analysis, including one shipment that weighed almost 350 pounds. Despite knowing that much of what he was doing was illegal, Mo continued his activities until he was eventually arrested in December 2016 ?.
The book describes in detail the seriousness with which the government viewed the activities of Mo and his colleagues after they were caught in the cornfield and the corresponding amount of resources expended by the government on this investigation, which was commensurate with a major drug investigation and prosecution. The FBI followed the cars used by Mo and his colleagues using airplanes with cell tracking capability, placed a GPS device so they would have a record of exactly where Mo traveled, executed search warrants on the seed packages that Mo sent to China, and on the storage shed where the seed was kept, planted decoy seed in the packages that were sent to China, used secret warrants authorized by Foreign Intelligence Surveillance ACT (FISA) that was apparently used to intercept’s Mo’s entire phone calls. According to Mo’s attorneys, this was the first time that FISA had been used in an economic espionage case involving privately-owned companies. Eventually, the FBI investigation involved dozens of agents, resulted in the collection of four gigabytes of surveillance video, 17,000 intercepted emails, detailed GPS logs, audio recordings and intercepted telephone calls, and numerous witness interviews.
The FBI arrested at his home in Florida in 2016, after a two-year investigation. A judge deemed him to be a flight risk and he was “shipped” him to Iowa by “Con Air”—the nickname for the Justice Prisoner and Alien Transportation System—and by bus, the entire trip taking approximately two weeks. He was then subject to house arrest by private guards that cost his family over $1000 a day, with additional charges for transportation. The government also arrested Mo’s sister at the L.A. airport on her way back to China after visiting Disneyland with her 2 young children. At the time she was taken into custody at the airport, the sister agreed to send her two children back to China instead of having them placed in Child Protective Services while she was in custody, which was the FBI’s other option. However, the government dropped the charges against the sister after a judge determined that her incriminating statements made at the airport were inadmissible because the FBI failed to advise her of her Miranda rights after she was already in custody.
In the face of overwhelming incriminating evidence, Mo agreed to plead guilty, and after a three-day sentencing hearing, the judge sentenced Mo to 36 months imprisonment. At the end of his sentence, Mo was deported to China, because he had never applied for U.S. citizenship, leaving his wife and two children, who are U.S. citizens. According to the author, this meant that “Despite the vast resources … in the end only one of the seven people charged were sent to prison. The company at the center of the scheme, DBN had not suffered any serious consequences,” and “other suspected insiders had not been charged.”
Aside from the government’s use of a vast amount of resources to chase and ultimately convict only a single person, the book raises a number of serious and important issues regarding the prosecution of trade secrets in the United States. First, while the author recognizes that there is no doubt that the Chinese government and Chinese companies are actively targeting the intellectual property of U.S. companies, she also raises the question as to whether the FBI’s approach described in the book and characterized by the author as a “whack-a-mole” approach actually deters further economic espionage, and whether there is a better way. As described by the author, “One person went to prison, and another took his place. Arrests of individuals also got mired in questions of discrimination and selective prosecution. In the long run, there were more productive ways to safeguard innovation; Improve education, subsidize health care, boost interest in scient and engineering fields, liberalize green card requirements so that the United States had an adequate supply of talented workers. But these were systemic changes that didn’t have the sexiness of an urgent foreign threat.”
Further, according to the author, top-level government officials still subscribe, at least in part, to “the thousand grains of sand theory.” Under this theory, instead of sending a few agents or using technology to learn the composition of a “beach,” as the Russians and Americans would do, China relies on its “large population.” “The question of the beach composition could be solved by sending ten thousand people—students, scientists, and entrepreneurs—to spend a day in the sun. At the end of the day, this mass of people would head home and shake out their towels. China would end up with a lot of sand.” Other commentators, according to the book, have described this “’army of amateur intelligence collectors” as “’locusts in a swarm, feasting on American technological secrets,’” and the swarm “’extended from Chinese scientists to Chinese students studying at U.S. universities,’ … Many of these students were ‘sleeper cells,’ … who would ‘lie low for years before they’re called into action, usually after they’ve gained employment in high-tech firms.’”
This understanding that China of a “’human wave’ of students scientists and engineers … who gather intelligence ad hoc,” combined with the viewpoint of Chinese Communist Party Officials who “viewed ethnic Chinese,” living overseas, “as critical to China’s rise,” has led to the investigation and prosecution of completely innocent Chinese—such as Wen Ho Lee, Xiaoxing Xi, and Sherry Chen—and “wrongfully implicates all Chinese working in the United States, especially Chinese Americans as potential spies for the People’s Republic of China.” Chinese American groups have also raised comparisons with the FBI’s focus on the China connection with the role the bureau played in rounding up 120,000 Japanese Americans during world war II.
For example, at the time Xi was charged with wire fraud, which the government regarded as a “backstop” charge until it could indict him for theft of trade secrets, he was the interim chair of the physics department in Philadelphia. He had emigrated from China in 1989, was a naturalized U.S. citizen, “was a world-renowned expert on superconducting thin films,” and “oversaw a team of fifteen people and received more than $1 million a year in U.S. government research funding.” The government charged him “with trying to transfer technology which makes thin films of the superconductor magnesium diboride.” However, four months after being charged, the government dropped all charges against XI after learning that the case was fatally flawed, including that the device that the government had labeled a “pocket heater,” was not actually such a device. Oops. In the case of Sherry Chen, who I represent, and who was a scientist at the National Weather Service, she was accused primarily of making false statements about a meeting with a Chinese official. The government dropped all charges approximately one month before trial. Despite being exonerated, Chen has not been able to get her job back with the NWS. The author writes, “Given the FBI’s institutional history of racial profiling, cases like Xi’s suggested a real problem. Faced with a complex investigation, an agent might subconsciously be swayed by a suspect’s ethnicity.” A consequence of charging innocent individuals of Chinese descent is that, as noted by the author, it not only causes the Chinese-American community to lose faith and trust in the government but can lead to a “brain drain” of “top talents” who no longer feel welcome in the U.S. and return to a hero’s welcome in China.
The book also touches upon other problems with criminalizing the theft of trade secrets, in general, and with the Mo case in particular. The government’s informant, Kevin Montgomery, a non-Chinese, had been by DBN to provide cover, and was extremely experienced in how to cultivate hybrid seeds, told the author that “more established U.S. companies had legally swapped inbreds with [the aim of creating super seeds] and had failed to arrive at the best pair of parent seeds.” According to Montgomery, “The FBI’s fear assumed a level of sophistication that … DBN’s scientists lacked.” He added that he viewed the FBI as “Keystone Kops, . .. Where the FBI saw an elaborate effort to steal intellectual property and threaten national security. Kevin saw a collection of inept criminals bumbling around cornfields.” Montgomery also noted that he was aware of a “more straightforward” and faster “way to reverse engineer inbred seed.” Finally, according to the author, many trade secrets have short shelf lives and “To Keep up, [the thief] either has to learn from the theft or steal again.”
In this case, the issue of the importance of hybrid seeds, as a trade secret, to the economic security of the U.S. is even more pronounced. In 2018 a German company, Bayer, purchased Monsanto—one of the companies that the government had tried to protect for $66 billion. While not a Chinese company, the transfer of the seed technology to an overseas company means that the technology no longer exclusively belongs to a U.S. corporation. Further, the book also notes that in Feb 2016, a Chinese company purchased for $43 billion Syngenta a Swiss agricultural company, that has an “impressive portfolio of genetically modified seeds …” and that has the ability to compete with DuPont and Monsanto.
The book also describes how this situation is really emblematic of a bigger struggle between the United States and China concerning trade, intellectual property, including trade secrets and, how each country views this. U.S. government officials are quite clear about the danger posed by Chinese economic espionage, claiming that it involves the “greatest transfer of wealth in history” and presents a clear and present danger to the economic well-being and security of the U.S. In support of this assertion, government officials will often quote the well-known “statistic” that China steals as much as “600 million” of U.S. intellectual each year. While often quoted, the author writes that there is no official or documentary source for this number. On the other hand, officials in China view the crackdown on IP by the US as simply trying to prevent China from emerging as world power To say, that the two nations are talking past each other is an understatement.
For the most part, Hvistendahl raises serious issues in a relatively straightforward and unbiased manner. However, it is clear where her sympathies lie. The author fails to provide information on the amount of resources and the companies cost of developing hybrid seeds. One of the primary goals of U.S. intellectual property laws, including the EEA, is to economize the provide protection to intellectual property. The theory that has worked very successfully in the United States since the 1790s is in simple terms, that if people make money off inventions and writings, other people will be incentivized to do the same and wealth will be produced. The author also does not address other factors that support the government’s involvement in prosecuting trade secret cases including, whether the Mo prosecution and other similar prosecutions actually deter future economic espionage and whether the victims in this case actually would have had the ability to sue the foreign actors such as DBN. The EEA provides U.S. companies under certain circumstances, but it not clear whether Monsanto could have successfully sued DBN in a U.S. court, and, more even if successful it seems unlikely that Monsanto would have been able to enforce any judge because of DBN’s lack of assets here. In such cases, there is a strong argument that the U.S. should not let a foreign corporation “get away.”
The book does not provide easy answers to the complicated, complex and important questions regarding national security, racism, ethnicity, justice, and the value of intellectual property protection to the U.S. and allows for the readers to decide themselves. It is clear from the book that government reform is needed in the area of economic espionage policy, investigation and prosecution and, this can and should be accomplished without weakening the general protection of trade secrets, which on the whole, serves the economic and security interests of the U.S.