what we're seeing, much more of an emphasis. you can see that in the common securitization platform. the benefit of fannie and freddie, which of course makes sense as a joint venture. setting the stage with competition and entry. and the second part, the resurgent of private will securitization our balance sheet lending goes very well with the credit box issue that everyone has discussed. until there is the certainty on, you know, the warranties and then the fair housing, lawsuits and the sort of state attorney generals from of a variety of factors that is in ending the resurgence of private lending is going to be tough to restart. and it is necessary to have a better system. ..

>> and he is really taking that approach now, which is i am going to reduce the credit list held by the gsc is, but i'm not necessarily going to pull myself out of the market and allow private-label capital directly participate in the

securitization of investor process. it is that is a change, it may be that there doesn't seem to be a lot of private market interest participating in this old way. and even the sheer size and scale, some are saying that there could be enough capital out there to do it. and this is kind of like them acting like a market maker and the goal is to reduce this through the process. >> on this point, a few years ago there was an assumption that private-label comeback quickly and that at some point down the road congress would perhaps more easily than what would be the case, advance a partisan legislation in the senate banking committee look like it's going to pass the bill this week, but not with as much majority to propel it through the senate this year. until we are not saying much of

a return on this market, we are also not saying as much of a bipartisan consensus to push for this this year or maybe in the next term of congress. but where do you think about leaves the fhfa in terms of advancing administratively some type of housing finance overhaul. i know that he said he really wasn't going to reduce legislation. but the worry think that he would take the if congress chooses not to act? >> first of all, as he said the vote is coming up and that is just part of the landscape and him saying that my job is not to kill that landscape by providing stable housing system and the

public role in housing finance and people think that why it is at abnormally high levels now and this is how private-label securities, even at their peak were not dominant in the market compared to the role the government waited and provided that foundation that our system operates under. and then people have alluded to the tightness of the credit market right now and the credit market is not just affecting some homebuyers but affecting the broad economic recovery and

holding it back as housing is really depressed compared to normal levels and not compared to the boom years of the mid-2000. and credit is most constricted for those first-time homebuyers who would be buying starter homes are also essential to making the whole pipeline of the housing finance system and it is not those first-time homebuyers and i think that this approach is spot on in terms of what is the role of it and what is needed in the housing economy and our overall economy. >> i want to ask you about johnson crapo. what we are talking about as many of the functions and this

includes these kind of securities executions and some of you are talking about restructuring fannie and freddie and if we try to predict this end state and what congress might do, instead of looking at what it might be here versus there, i think you have to move back to the base principles. they talked about this and this is an the first position ahead of the taxpayer and i think that that sort of principle is critical.

how we deal with that beyond that is another principle that we have come out of the government playfair and what does that role mean and and i think those are the items that back to what the director is doing with johnson-crapo and what they're trying to do rather than what is one or the other, are we moving, are we talking about the right principles and that is why i think the debate has gone but i think the concept of private capital coming back ends is critical. so i think that we are looking for the solution. >> you are involved in this but is it worthwhile to look at this

and the next of the celeb the firms build capital and from a year and a half ago just making sure that he doesn't leave. and then we say the firm should build capital and how does the system evolved with more capital internally and through the situation going from reach 90 is triple. that night he is very close to

zero and the hedge funds will wind down and it is much better than the system before the financial crisis. >> how much of this could they advance unilaterally and administratively? >> a lot of what i just said was that the arbitrator do. and it's like they have market power and they use this market power and there have also been

great benefits to what the gsc's have done as far as the concentration of risks and this includes an efficient and standardized market. when you contrast this world with howie long is done versus the private label capital markets. >> i'm pretty sure we want to keep the good and address the bad. the bad is the use of market power in the 50 basis points shaved off enough that we want to address and we go back to the flesh mondays and all of that. so we have a good regulator, but that is a concern.

>> asking the panel, how do you deal with the ownership structure aware whatever this new or reformed model looks like and i want to read a quote. this is from dan who is the former ceo of fannie mae before it was taken for conservatorship grade when he testified before the commission, he said that by 2006 fannie mae was engaged in a continual struggle to balance the duties and shareholders and expand lending and provide liquidity and meet housing goals for the underserved and serve shareholders and homeowners alike and perhaps we should've gone to the government and got a clear answer to the question, do you want more capital lending. there are subjects with secretary paulson, but i do agree with this ultimate assessment that cause some troubles and lies within their business models saying that multiple task cannot withstand 3% price decline on a national

scale even without global turmoil and he went on to talk about the horrible choices that the companies face in 2006 and audio, to the extent come hopefully were not in another situation like this again. but if we are in that environment where there is then a lot of lending in an entity that is countercyclical amah is there a way that you to you can address this ownership structure to remove these pressures from somebody in that position. >> i would like to say yes and a couple of regards. first of all that sort of back to the future. they started where you can send the structure back to that and that's what you use of the federal homeland banks where they are mutually owned by all the participating lenders, so you remove that conflict of maximizing shareholder returns. quite frankly i think it is important to realize how much reform has been implemented and

not just the way the gsc is work with a fully empowered regulator but what was the core of the problem and that was the unsustainable mortgages that brought down the housing finance system. and they are the reforms of the ability to repay discouraging the riskiest features on loans and if you just take these loans, for example, just the product features, you would have reduced the default rate through the crisis with the 2000 and 2000 a book of business to well over 5% which is more than readily handled and that is not putting into debt to income limit. so by making these more predictable and safer it is fundamentally a better system and we need the risk of error.

but we securitized the credit cards and loans and we have more transparency in the problem as we have a lack of transparency where investors did not know what they were buying and did not get what they thought they were buying and we had volatility that you could not match in our markets are actually quite good at pricing and managing risk on its transparent when the volatility is predicted. >> i want to tweet that comment. it's not necessarily that they didn't know and there is one clear expectation that house prices would always go up. and we know with all these funky

futures and these financial innovations, saying that that is okay because it will be worth more today than it was before and so we are good. and so we sort of never asked back to the from this lehman brothers perspective and then go through the details and going down by three to 4% and basically most of that will get wiped out because it's a of the terrible subprime loans. and then they assigned the probability to this as we get back to the conversation like the black swan comes in. and so it is now known and what is the next situation? a 60% decline in house prices? something else?

>> interest-rate shock or something like that. though, you know, we

we found it is tougher to go against the situation and we will have to see how it goes. it's just bad policy. it's just that it was bad policy, the third amendment was not necessary and there are many cabs, it didn't make sense of

the time and it doesn't make sense today. it will be better as a matter. >> was a mistake to not take 100% of fannie and freddie, given that the taxpayers had all of the downside? and people had talked about this being the maximum that the individuals agree to put in, 400 or $500 billion and it isn't really where the clock stops? >> yes, i had a paper that was written here and it goes through in more detail about the financial crisis. and so my fans are there as well. the basically the structure of this was put in place to avoid having the assets and liabilities coming in. knowing that the administration would take so long to move

forward. but, you know, the support for the government was unlimited and there was a payment in kind provision as usual in these agreements and the government could have put in this 10% rate. so again, for many reasons it is baffling. but again, you start with this policy. >> are there any other questions from the audience? >> thank you. this whole idea is interesting to me, but representing the mortgage bankers which are relatively thinly capitalized, how would that work with the mortgage bankers and would they be required to inject this, they are not members of the homeowners thanks for the same

reasons and it is non-depositories in general. >> i think those figures are a critical part of the system and i think there is first of all the cash window that is one of the things that the current gsc is provided is very popular with small wonders in general and they're also corresponded arrangements the mortgage bankers could do that would feed into mutual structure. but i think both of those are ways to address it and in any event i would agree this article that they be addressed on concern that we had about some of the possible reforms as this has concentrated more postcrisis and we think that is an unfortunate trend and that we want more competition.

and they want to be able to get a mortgage at a good rate and they want credit to be there through the cycle. and i think that what we really need to do is dig about how that interface totally works. we need to make sure the back room of it is stable and sound and responsible and ultimately that it needs to serve the customers on the tree. >> without utility or the co-op model, would you envision there being just one? would you have multiple situations are you really just need one? >> there are various different options and there is a consensus on a lot of things about gsc

reform and we want more private capital. so i think any system will have more private capital in front of it and there will be more capital required by this and people differ about word to talk about it. but at far higher levels and people are talking about multiples of 10 and a capital that was more so there than before. so you could combine the co-op model or you could have multiple guarantors. i think that all of this is a continuous asian of private mortgage insurance companies with this referred to as greater scrutiny as to the capitalization.

>> there are people who disagree on this stuff and i look at this model and say that we have a number of problems. i mean, if anything it enshrines the too big to fail problem. so i think that turning this into a co-op is a joint venture and i think we've seen some ominous terms. and there's another player to the system and the shareholders should get a zero and i know it's ironic that if someone says you should do this, i would say no, don't stop there, run it by the government and call it what it is. so that is my two cents more. you have time for one more

question. >> and it looks like a lot of us didn't have the chance to assess this closely. but there have been a lot of ideas out there, for instance in moving to a window on the loans going forward and this didn't seem to go there, i was just wondering how the notion of allowing it in the 36 month him period would change the direction. how far they'll go and do you think they would might consider this? >> that is what i was getting at was my first comment, which is these are a very important first step and positive and when you do study them, there is also the

payment issue and some requirements around if this review is done and there can't be a subsequent purchase. it also rescission of mortgage insurance doesn't result in an automatic repurchasing and those are significant steps. but what i believe is perhaps even more important is the fact that the director said they are committed to working on these things and we haven't yet seen the strategic plan and i have the impression that some of these items that we mentioned today will be in this plan to keep on working on these items. so i think that like many things it is an editor of process and the director is making it such a point in his speech and talking about working on it. i think it is as important as what words are on the page. >> i would like to add that i think the two key components are going to be a surreality with a

requirement that you show some the fact had some causation with the mortgage actually defaulting, which today there is astonishingly no requirement of that. then to add to that you have the gsc is currently unilaterally part of this and you have to buy back and they are the ultimate deciders on that. this includes some dispute resolution system for that. and i would certainly agree with that. >> this is not something just a secondary market or pilot level market would raise in terms of this. but it has to do with the mortgage industry itself, i think there is some responsibility and doing a better job of manufacturing the loans in the first place.

so when he think of the mortgage industry in many instances, it's like we roll lots of cars off that line and sometimes a holster and well. you know. and that is not acceptable from the carmaking perspective and it shouldn't be acceptable from the mortgage industry's respective and we have done a lot to try to ensure that the information is important to the credit risk on the loan that is quickly captured or put into the loan files and originated through the process and that will sort of, in many ways, help with this issue along the way with the concept of materiality. we note up front and the long one can originated but it was provided appropriately and we are talking about credit scores and important attributes such that the risk of her purchase will be much lower because of the improvement in the manufacturing process itself. >> is great, and i think we will get that. thank you both for attending and

we will be you at the next one. [inaudible conversations] >> tomorrow we will be on capitol hill to be talk about regulating the financial markets. the subcommittee on financial services will be looking at their agent is budgets for the coming this year. let coverage will be on c-span.org. >> throughout the country there is a convergence of left and right agreement on very important things that is being

pushed down by the corporatist group on both the democratic and republican party and their leaders. so we start, for example, with public opinion around the country. they accept the patriot act restrictions on civil liberties and free speech in this they convergence. they don't like handouts or gives away and especially the wall street type or many were put into jail. but instead they want a crackdown on big business and it is the kind of mainstream mainstream versus wall street nexus. they don't like the empire and they don't like us pushing around into countries and losing our soldiers coming back traumatize and wasting trillions of dollars while all of these

individuals see crumbling public works. so we are blowing it up overseas in the trillions of dollars and we're not repairing and and that is a convergence issue. >> ralph nader on creating left and right alliances to battle wasteful spending at 8:00 o'clock on c-span "q&a." >> executives from aircraft manufacturer boeing and pharmaceutical company eli lilly testified on capitol hill about economic espionage and the problem of intellectual property theft. the senate judiciary committee is considering legislation to increase criminal penalties for corporate spying. sheldon whitehouse chairs this hour and a half long hearing. [inaudible conversations]

>> hearing will come to orderer. and i am expecting that the ranking member and senator lindsey graham will be here so shortly, but i just saw him on c-span screen and i know he's on the floor and not here.m his sta so i permission from his staff to proceed and you will join usj asoi soon as his schedule permis and i also want to recognize in the audience the gentleman who has spent many happy hour in. here when it is working forn chairman leahy and it's good to have him back in ant c different capacity and we are having a hearing today that is entitled economic espionage and trade secret theft and our lawstheft. threats. or today's today the subcommittee is going to explore how we can betterlort osetect americaner businesses fm

those who try to steal theirope. valuable intellectual property. american companies are renowned as being the most innovative in the world and companies of every size and within every industry, from manufacturing to software to biotechnology to aerospace own large portfolios of legallye protected trade secret secrets they have developed an innovative. in secret saucece may be a companies most valuabe asset in the theft of ththese sr egrets canet lead to devastating consequences. for small businesses that can be a matter of life and that. the risk of trade secret theft r has beenet a long around as long as there have been secret tos protect and there's a reason why coca-cola has kept a r coca- ita locked away in a vault for decades. but in recent years the methods

used to steal trade secrets have companies sophisticated and companies must now confront n t on aity that they are being attacked on a daily basis byir cybercriminals who are determined to steal their intellectual property. as attorney general holder haswo observed there are two kinds of companies in america. those that have been hacked and those that don't know that they the tradn hacked. today a criminal can steal all of the trade secrets a company owns from thousands of miles away without the company everofr noticing.ng are many of the cyberattacks we're seeing are the work of foreignfn governments. china and other nations now sinessely steal from american businesses and give the secrets to their own companies.

their version of competition. and let's be clear, we do not do the same to them. they are now going through a healthy debate in america at the scope of government surveillance and there is no dispute about oneut thing. agencies do not steal from foreign ministries to help american industry. and while cyberattacks areradits increasing, traditional threats remain and company insiders cans still walk off with trade secrets to sell to the highest bidder and competitors stillbi secrets by simply breaking into a factory or office holding and it's impossible to determine the full amount of the law to american businesses as a result of 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 along in the s

defense department has said that every year and amount ofntained intellectual property larger than that contained in the library of congress is stolen of from computer networks belonging f tes oican businesses and government. estimates of the value of ip stolen by foreign actors are as high as $300 billion. alexander, until recently the head of the nsa anr of cybercommand at the pentagon has characterized the cybertheft of american intellectual property is the greatest transfer of wealth in history. e and of course, we are on the losing end of it. r but no estimate can capture the real secret of that. one other steal our secrets, they are stealing our ideas.ng r

and they are stealing our innovation and most importantlyb they are stealing our jobs. so in my own state of rhode island we continue to face unacceptably high unemployment e despite having some of hav the t innovative businesses in thesine country. if we do not protect theirwe businesses don from those who sl their intellectual property, we are letting that innovation go to waste and we are letting american jobs overseas. in the past, some companies were reluctant to talk about this ththey hcause no one likes to admit they have beenav victimiz. but many are now coming forward to speak out because they recognize how important it is to that we work together to address this common threat. and i particularly want to thank the company representatives whoe are appearing before us todaaryn the second panel, as well asmans many others who work closely anw with me and other senators on

this issue. the on lasncouraged that theti administration last year lease to blue print for a strategy to combat trade secret theft. agencies across the government are increasing efforts to address this problem in the administration must recognizety the that the theft of intellectual property is one of the m most important foreign policy challenges that we face and it must communicate to china and other nations that stealingt from our businesses to help their businesses is unacceptable. in congress we must do our part and we need to make sure that our criminal laws in this area are adequate enough to date. set last fall senator graham and i release a discussion draft of legislation designed leg to verify the state-sponsored overseas having that could beuld be prosd

as economic espionage and topio. strengthen criminal protection of trade secrets. and we received valuableggestio comments and suggestions about this legislation and we look forward to hearing from eyewitnesses today about how tot improveo our laws and what we ce do tolp help defend our industrs legislatope to introduce legislation in the comingio wee. companies also need civildies at remedies against those who steaw from them. compa while state law hasth traditionally provided companies with remedies from traden of t secrets,ra there is currently ns federal law that allows seek companies themselves to seeknsto civil remedies against those who steal from them.victi of the senators have recently introduced legislation to the victims of trade secret theft and the secre topttheion oof pg thieves inin federal court.cour. the senator has also introduced legislation to give them trade

secret theft and i hope that the committee will act soon onwill a tgislation toct soon strengtheh the criminal and civilsecret th. totections against trade secred theft. and i look forward working with these courts toward that goal. and this includes the threat of trade secret theft on a daily basis and i hope he will be hope clear by the end of this hearing that we need an all in approach westhis hearing. and we need to strengthen our criminal laws and our law enforcement agencies mustade prioritize this before it occurs in investigating and prosecuting it when it does occur. the remains include us passing enator broader security legislation and i appreciate the gentleman on that effort.

i look forward to hearing fromis the gentleman today and working with my colleagues on both sides of the aisle to address this critical issue. our first witness is randall coleman, the assistant directord of the counterintelligence division of the federal bureau of investigation.investiga mr. coleman is responsible forti ensuring that the fbi carries out its mission to defeatfeat foreign intelligence threats and he began his career in 1997 and has previously served as an assistant special agent in charge of the san antonio division and chief of the counterespionage section and ahe special agent in charge of the little rock division. prior to his appointment to the fbi he served as se an officer e the united states army and we are delighted that he could join us today and we asked him to

proceedis , sir. with this. >> good afternoon, i am i'm pleased to be here today with he fbi ciscuss the fbi's efforts to trade osecrets for the fbi considers the investigation andc economic espionage top priority in the 2002 alone the nationaldf counterintelligence executive estimated a range of loss to thn u.s. economy approaching $400 billion. two competitors who illegally rn obtain a broad range of trade na regret, degraded our nation's advantage in the global market and this includes aggressive mitigation. the fbi is working to pursue economic espionage againstthose us-based businesses, academic institutions, defense

contractors and government a agencies. nd has made significantost progress in putting some of the rsst egregious offenders behinda bars. economic espionage and theft ofc trade secrets are linkedrets tod threat and the growing trend of cyberenabled trade secret theftp it may be stealing information for personal gain or perhaps benefiting other organizations or countries.ively foreign competitors aggressivele target insiders to a the teansmittal of a company's mosto valuable information. however they cannot protect us by acting alone and the programc partnership overseas a network of more thans 80 special agents are serving as strategic program coordinators y work hand-in-hand with industry and academic institutions across the country. theseross partnership coordinats

include presentations and briefing senators as an early referral atomism for possiblecoc economic espionage and tradeecrd secrets and cyberintrusions. working through more than 15,00 contacts nationwide, thisdetet, program helps companies detect and deter and defend against ini attacks with sensitive proprietary information.adversa the fbi take seriously investigating economic espionage and by forming close partnerships with local logical businesses and government institutions, the fbi wishes to have a greater impact on preventing and deterring theonle loss of trade secrets before any loss can actually occur. given the opportunity to testify and i look forward to answering any of your questions.

>> i would like to talk with you about a couple of things. first of all, have you any reacn specific reaction to the draftlr legislation that we circulated for discussion purposes? >> i will stand on this, any legislation that allows the fbi to have a b3 >> i will stand on this, any legislation that allows the fbi to have a better advantage going after our foreign adversaries as it relates to economic or not in and theft of proprietary information, the fbi is in favor . of.>> >> zoomable he people wereg wite working with the department ofs justice and do you support thisd gs yes, sir, absolutely. thin >> one of the things that i have observed and have watched this for a while is that whenever i hear about a case this, every case there has been some nexis to old-fashioned intellectual

property theft and somebody taking the dvd home, one taking the patented item out of the factory. and we have seen an explosion intrusions and extraction through the cybernetwork of no o intellectual property with no other technique involved. to my knowledge there have beenr no charges brought to anyone for that kind of activity in that it something that is very issues, complicated. i understand we tha have huge no present issues and there's an overlay with the nationals a lot intelligence services that wille wire a lot of effort and some or the targets are overseas and that creates another array oflea legalities and issues and having served as united states attorney

i can see how very challenging to make. are but when we are on the losing bi endggest of this, we would likeo see a little bit more hard. prosecution activity.is can you tell me what you think is behind that and is there anything we can do and is there a resource question anwhd what n we do to put points on the board against these people and courts. law >> mr. chairman, i think you uescribed it to a tee.iously wyo obviously when you get outside there borders of the united states where there is a foreign nexis, our ability to conductnvi effective investigations has diminished greatly and i will tell you that we dove have ongog investigations that i would havg foresee as having a logical conclusion that i think that you

would agree, as you described and in fact the fbi actually has res placed cyberassets and resources working at our national cyberintrusion test scores that are working hand in hand and shoulder to shoulder on a spit take investigations and i think that technology plays a critical role in the advancement of the technology and makes the threat remenduch more complicated. but i think that there has been tremendous progress made by the fbi, along with our partners anp investigating these types of crimes and so i'm hopeful as we go forward that we will be abe to todemonstrate that we have bn affected and will be affected in this arena. >> i would not suggest that they haven't been affected. guys

i see what you guys do a better. if i had to take my concern andt turn it into a single single phrase, it wouldn't be bsdi is not effective, it would be that they are so busy trying to keep track of whoit woulying to kee h the doors and windows and ward off companies that they are haci hacking into, that there simply is a resourcen constraint inthe terms of taking all that effort which could be devoted to tracking these attacks and helping the businesses and their just isn't a good capability ton sit down and go through puttingp the t prosecution passage togetr and working through intelligencd agencies and working on the steps that need to be done. so in many ways i'm trying to throw you a friendly question, saying let usays help you do wht needs to be done and i wouldn'to want to take anybody off of whae they're doing in order to put aa prosecution package together.

but at some point we have to coy have a robust enough response together that we are starting to, for one of the better examples, it indict the chinese colonels and generals were behind pulling this kind of thievery off. >> i think another thing is the threat being so immense that ise what makes this outrage soo important to what we are doingut in bringing in the privateo work sector and working hand-in-handc so we can try to get out in front of this that.re absol but you are absolutely right, in the threat is so immense that the fbi cannot take thishe on on alone and whatever necessary help that we can get in this ins other industries and sectors is of great help to us. >> there is a provision in the

last appropriations billat requires the department of justice to do a report for us.o, looking forward and looking out a couple of years and thinking about what the structure shouldr be like for addressing this particular threat. it has exploded, as you know an it grows at an enormous rate. just a massive levels. i am not convinced at this point that the present setup makes a lot of sense.at and if you look at another area that has exploded, what happened when aviation began and theonduf effect on the conduct of warfare, he started with the army after is a subpart of thisr

and that became a subpart of the army and it wasn't until after world war ii that we had a longe u.s. air force and until then we have been a successful leader oi military operations and we really weren't set up right. i'm not convinced that we wereou sat upright and i would invite you to comment on this. but let me also ask a question for the record that you can take back to headquarters and how does it make sense to have these cases in yourperhaps i the counterintelligence division and the cyberdivision and how do you sort of months i'm to be efficient and smooth flowing?fln because as ig? understand it, eh of those different sections has a piece of the. >> the first part of your comment is our restructure

correctly. and i will tell you that i look at this on a daily basis is a or priority for the director to l look at if we are efficiently and effectively addressingoo the prioris and it has become a priority because of the expansion of the threat. so there are always ways that we canis address this and i can't t procss how important that is and what benefits we have seen from that. t we have expanded this across the country to 15,000 contacts and we are conducting over 7800 presentations and briefingsontaf year and we are starting to the is the immaturity of theseng to p relationships that are paying off, fact that companies

are starting to come and academic institutions are coming to us early on so that we can get engaged in the problem after versus after a bad actor has l us anft the company and that is absolutely a victory for us in this process. but we have a lothave a of roomr improvement and we will continug to do. and we are always looking at tat ways to improve that. >> in the context of that if yod could take it as a question forr the record and tget an official response at organization, i'm i interested in achieving five or, 10 years out, is that similar division across all of that bureau will continue to be a wise allocation of whether werta are in a transient stat towardse what ultimately will be the way that we address this. than >> thank you for your servicekt

and i know that this is an immensely challenging area o because i'm all sorts of the resources and i'm proud of thecs way the fbi conducts this andour thank you. >> thank you for having me. >> we will take a two-minute the recess of the next panel itself sorted out and come back into action. [inaudible conversations] [inaudible conversations]

[inaudible conversations] henaudible conversations]ght, t >> okay come at, the hearing will come back to order and i ngink the witnesses forticipati

attending and participating in i this hearing. we have a p terrifican panelel f witnesses and i'm delighted tha you are all here and this is very promising.promising president ofn is the vice president of intellectual property management for thenty boeing company, which has plenty to manage and hema has worked there since 1984 and he hasthe managed to patent portfolio and protection of trade secrets and image consumer products and trademarks and patents. rrent to being appointed to his resition, he has served as the techntor of global research for boeing research and technologyol which is the company's advanced introduce an we welcome him and of you give your statement, i will introduce and take the statement of eaand each witnesss

will open up for questions after that. please proceed, mr. hoffman. >> that afternoon, chairman white house. on behalfushe boeing of the boey i thank you for this hearing and i'm grateful for your leadershit on the laws. it's a privilege to be a participant and to provide thecp challenges faced by americans and invaders. we first began making twinlanes airplanes in 1915 from a boathouse in seattle and while much has changed, it remains our enique as we are right here in h the united states in the final assembly is located in the so states of washington anduth soh carolina and we have facilities for engineering and manufacturing in multiple state including oregon, florida, montana, and utah. it is primarily in a state ofara

california, pennsylvania, texas, arizona, or in alabama. boeing employs 160,000 people across the united states and its 2005 we have created more than n 15,000ew high-paying jobs drive by a backlog of these airplanes. last year we paid $40 billion to more than 15,600to more th busi5 which collectively supported an additional $1.5 million across hes country and the contributin to the economy today and for th past 100 years is a result of ingenuity of our highly skilledt employees and innovating each step of the way they have developed a sought after bo'sucts and technologies intece world. their cutting-edge technology tk takes years to develop an enormous expense approximatelya $3 million of those per year. the bulk of the innovations are protected as trade secrets. so becauses of this trade secret protections is vital to securing the property of boeing.

boeing does not have one recipe for its secret sauce that thousands of trade secrets that are critical to maintaining the unparalleled success and boeing unfortunately the valuable engineering and business information has significant risks once p publicly disclosed the rights and trade secrets might be lost forever and with investments wiped out along wite competitive advantage that the trade secrets provided. of course, boeing is on guard to prevent the theft of our trade secrets and today companiesade n cannot simply lobbies andss estate.ng inf the vast majority of the engineering isa stored electronically and that is really d just brought great gains in productivity and also has increased risk. at the moment we could lose a trade secrets or breach in thetk network through one of our from employees or partners were through and escape at one of our many supplier facilities and fear of this is not just a concern for boeing the middle and small size companies that rely on trade goods have as much

or more to fear as big companies do. particularly if their survival depends on a single product or service. given their the risk u.s. compae face everyday, more needs to be done to deter thieves from stealing our de trade secrets and this theft is a crime and we must send a clear message that we will not stand by as these businesses her economy and steal our o jobs. your as we strongly support your efforts, chairman white house, f and also the efforts of the ranking member to call attention to the issue and provide law enforcement with additional tools to deter the trade secret. theft. the uniform trade secrets act st provide the framework for state legislatures to adopt tradeframf secretor protections in the standards and procedures adopted nd asary from state to date and jurisdiction made public it further. as such it is a real concern ofc u.s. companies that doompani st actions you don't believe eithe not until he also acknowledged e companies to take immediater

own action of our own in federal court to prevent the loss of valuable trait egret in state courts and federal law enforcemn enforcement cannot act quickly. not. we w therefore we would also likeou o thank the senators forhe t sntroducing the tradera secrets act in your efforts to establish a record company to file an application in federal district court in order to seize property and trade secrets stolen frommp the company and we look forward to working with the senator who the bill, senator coonsortant and senator hatch to pass this legislation were encouraged that the new laws under discussion, if passed, will strengthen by overseas trade secret enforcement by raising awareness of the issue. ehe votingss population andand empowering our trade negotiators inll encourage our trading artners to similarly raise the bar.and we applaud the efforts to

strengthen the u.s. trade secret laws and protect our valuable assets and thank you for your time and hearing are you, information. >> thank you. i appreciate your testimony. the next witness is the president and ceo for the center of responsible enterpriseent an trade and it is also known asteo creek.org. it is dedicated to helping people and companies and supply-chain numbers implement leading practices for preventing corruption and protecting intellectual property. prior to this in october 2011, this was the corporate vice president for global portions of microsoft since 1990 and i have to say that as a lawyer i am

impressed by the pathbreakingng work at microsoft has done to gr after spammers and people who a come in after them on the net with civil series of data back to probably 15th century english, ma and it was quite impressive to see such anciente doctrines applied to such a newc problem and i think the complaints inrosoftn th atthat y really set a model not only for the rest of the corporate sector in that area but even for government enforcement.ace. so you come from a good place and we welcome your. >> thank you very much, chairman whitean house. hello, i'm the center of their sponsors center and trade and i appreciate the opportunity to testify today.

this is a nonprofit dedicated to helping intellectual property theft including trade secret theft and we provide resources l large and small that help them assess risk and develop strategies to protect trade secrets and other i.t. assets, both within their organizationsr and also in the supply chains. in today's integrated globalnowd economy, companies that succeed a hotning knowledge in into competitive advantage are the ones that will createcr new jobs and drive economic growth.o companies rely on us to protect knowledge and there are tremendous value that make them targets for theft and this econo includes but economic impact of trade secret theft and devise a framework for this mitigate

threats. this includes the pwc report that is attached to writtenhe rt testimony. and the report makes clear that the problem of this is massive and afflicts damage on the u.s. and other economies.i if we are to energize her seret, economy by protecting tradeon secrets, we need to focus on two peoples.ncen at first we need to inticentivie companies to take proactive measures and implement best practices to ensure the front and within their own organizations and in their supply chains. consistent and we need a consistent vegetable and harmonized legal systemha to provide effective remedies when a trade secret theft has occurred. this includes companies who need different tools and strategies to protect against each type ofe threat. businesses need to be particularly caught and sentneee under supply chains and the growth in recent years have

accent of global supply chains comprising hundreds and brout tremendsuppliers that has brought an offense and given eos many firms in the enormous edge competitive edge and this often must share confidential and highly valuable business information which may be located in a different country withdiffo different laws in different corporate ones. in the face of this reality it is until that they the protect trade secrets not as within their own four walls butl with suppliers asiers well. and we recommend a five step approach for mitigating threats. he suggests that companiesd cate identify and categorize their trade secret and conduct a risk assessment as well as identifying the most valuable trade secrets to their

operations. including losing the secrets ani using this collected to allocate resources and strengthen the postheses forfor protection and this includes a pilot program with more than 60 companies around the world. helping them assess what abilities to mitigate threats. they saw matt pilot program, wea justte launched create leading practices that helped to improv and mature than management systems for ip protection and for anticorruption and of course no amount can completely safeguard this from that. this provides meaningful remedies against this and recen, high-profile criminal enforcement actions are promising and i applaud you forr

your focus on law enforcement. and this includes a harmonized system for owners of trade wille secrets that will serve as aodel model around the world and the h problem that happened entirely gislaeas highlighted by the legislation is worthy of furthen study. governments and companies they want improving this andld companies would benefit from taking this employing bestactic practices to manage risk. they also need an effectiveh to legal system to enforce their rights and the know-how has been misappropriated. thank you for holding this mis hearing and sgiving me the opportunity to testify and i questions.d to your >> thank you. our our n next witness is the of president of steel products in baltimore. he has owned it since 1998 and the company exports this to 36oe

countries and has been recognized as one of the 5000 un stategrowing companies in the united states for each of the execboao years. he served as an executive board member of the national association of manufacturers and the chairman of the boards of both the alliance for jobs andf innovation and he is also a member of manufacturing and weitiveness as well as the governor's international advisory council and we welcome ndu here, please w proceed.tehoa >> thank you, chairman white house and members of the subcommittee on crime and terrorism, thank you for this ce focus on this critical challenge of trade secret theft and theme opportunity to testify today. as you mentioned, i am the basd in baltimore city and we make everything in the usa in a veryt proud to report that we also

export to 36 countries and myo favorite one is china. for thr this includes the medical pharmaceutical industries and i'm i am here for three reasons. number one, trade secretstrade g important not just for ctnufacturers that are big but a also for small manuurfacturers like mikeli up area and this includes the trade secret lawsei that must keep pace with today's threats which recently are not only interstate butin international threats and includes manufacturers who need your help to effectively and tos protect trade secrets and we need to secure strong commitments to our trade agreements. like so many other manufacturers, we compete on the global economy and we succeed through investing in ideas and d innovations in the hard work ofe our dedicated employees.ht when i bought the company in 1998, we were a local business

and we had a few employees from 800,000-dollar per year in sales and last year we almost hitlmost $500 million $ in sales and nowd have been a proud member of the manufacturers and we manage em about 40 employees and we haveme 12,000 members. i am also the cofounder of thei national alliance for jobs and innovation and we are working hd hard to strengthen and protect intellectual property right and we want to it include this forev trade secrets that are more important than ever and including things like drawings and proprietary manufacturing processes, software, formulas, all of these things are valuable to the nation including $5 billion for companies and even more when you include smalr

companies.ecre the secret saucet is those trade secrets and that is our i pertie intellectual property and we leverage the expertise of those and 20% are mechanical engineers that are degreed and they come up with specific performanceat u characteristics that make us unique and different than our at chinese competitors and some people think that almost 3% of3p our gdp is life on trant lost to these trade secrets being stolen. were acro how the veterans day is a traitt is installed by individuals fore stealing some of the customer list and i'll it can be done one a thumb drive and it can be sold to governments were chinese companies across the world.rs and these cyberincursions are threatening to us and we haveko lasers and robots and if itan could happen to our system, they could manipulate our equipment to hurt our employees and that would be devastating to us or the thing i'mt mheos tthing i p

is 981 days that we have gone without a safety incident and if some hacker or national or to b able to break into her system and manipulator am, we are doin everything we can to harden the we s network. we spend so much money that we could hire another unemployed steel workers to fill that job rather than spending money on his activities. the good news is that washington is starting to recognize this problem.irst leave washington to do three things, personal we need you to have strong operationales a collaboration between federal agencies and we cannot have the silo approach that we have right now. leave the fbi cooperating inith cooperating with customs and tsa and we all have to work together. enforce need access to enforcement for trade secrets and well conceived legislationct recently introduced by senator hatch.or th this is going to give us the

evel a ability to pursue people in the federal level and on state-level and finally we need to meet thef global challenge of trade secret theft secr global solutions. ine trade agreements to stop the steps. conclusion, the chairman and the tor, trade secrets are vital for small and large and the policies must keep pace with wih today's threat. effectely and manufacturers need your help to ensure that they can effectively and efficiently protect and enforce their trader secrets andad i applaud herfocun attention to the critical challenge and focus on solutions with strong global partnerships and closer collaborations between federal agenciesal and between government and business and improvements to thes. u.s.ii laws, including federal civil enforcement, we can have a realt arpact that we desperately needw now i look forward to answering your questions and i think you.

sir.greenbtt, our final witness is douglashe l torment the general patent counsel for eli lilly and company and he serves as a member of the board of intellectual property association and the association of manufacturers of committee for intellectual property.he he astutely served as the 2002 e cochair of the ill@ he astutely served as the 2002 cochair of the intellectual property and antitrust task for force for the united states council for it international business. welcome. pleaseoc proceed.ternoon .. 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 my industry, but to all segments of the american economy, eli lilly and company was founded and head quartered in indianapolis, indiana on may 10th, just last saturday, lilly celebrated its 138th birthday as a u.s.

company. our mission at lilly is to discover and develop medicines that help people live longer and healthier and more active lives. our major areas of innovation include therapies for cancer and diabetes and mental illnesses. to fulfill this vision, lilly must rely upon intellectual property protection that includes patent and trademarks and trade secrets. unfortunately, like too many of america's leading innovator firms, lilly has recently been the victim of trade secret theft. a cross sector group of companies supports a harmonnized remedy for trade secret misappropriation. we're pleased to introduce the act that would accomplish this objective. we thank senators kuhns and hatch for their leadership and we're also encouraged by your work, chairman whitehouse and ranking member graham to ensure law enforcement has the tools it

needs to prosecute trade secret theft. we appreciate the efforts by senator flake to highlight the continued problem of trade secret theft that occurs abroad. the bipartisan interest evidence the by this committee's work is important to our shared objective of the effectiveness and efficiency for remedies against trade secret misappropriation. trade secrets are an essential form of intellectual property and part of the back bone of our information based economy, whether you're a major pharmaceutical firm or startup software company, your trade secrets are a big part of what sets you apart in the marketplace and protection is vitally important to maintaining a cutting eblg and keep workers on the job. increasingly the target of efforts to steal propriety information harming global competitiveness. trade secrets are particularly

vulnerable to theft given the rise in global supply chains and ram pant tech no logical advances that resulted in greater connectivity. a theft can come through cyber attack, voluntary or involuntary disclosure by an employee or joint venture partner. the act makes a trade secret a crime and the tools thieves use in their attempt to steal trade secrets are growing more sophisticated by the day, however. our laws must keep pace. the eea as a criminal statute necessarily has limitations and what we're very much appreciating the cooperation we get from federal law enforcement and fbi and department of justice have limited resources at the time and never be in a position to bring charges in all cases of trade secret theft. state laws provide an important right for trade secret owners to give a civil action for relief. state trade secret laws develop and make sense at a time when

misappropriation was largely a local matter. for companies that operate across state lines and have trade secrets threatened by competitors across the globe, the state laws are inefficient and often inadequate and consistent with how other forms are protected. trade secret theft is likely to involve the secret across state lines and swift action to protect the trade secret from being divulged. this is true when the theft is by an individual looking to flee the country. once the trade secret has been divulged, it may be lost forever and the harm from disclosure is very often ir rep perable. we're pleased that the act would address these limitations and provide trade secret oerns with the same ability to enforce rights in federal court as owners have. the breadth of support fort legislation from companies focused on diverse areas such as

software, biotechnology and semiconductors and medical devices and agriculture and apparel demonstrates the importance of a harmonnized civil remedy. the companies have already indicated support often disagree on other areas of intellectual property and protect but we're united on this front. we also look foerrward to worki with ranking member graham, for the tools necessary for trade secret theft. we look forward to working with senator flake and agree it's important to study ways for overseas theft. american companies are competing globally and the know-how is subject to theft everywhere. the national solution that provides predictable trade secret is therefore essential to our global competitiveness. the act will establish the gold standard for national trade secret laws globally and serve as an important base for international harm onization efforts. we urge the committee to consider the legislation and for

all senators to support it. thank you again for the opportunity to testify today and i look forward to your questions. >> thank you. let me welcome senator hatch and kuhns for the hearing. let me ask unanimous consent that senator leahy's statements be put into the record, which it will be without objection. 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 considering the changing landscape and sophistication of the means of which our intellectual property and trade secrets can be obtained. so anything that helps to improve law enforcement's ability to protect our trade secrets and allows us to be more secure in keeping those secrets so they are still valuable is very much appreciated by boeing. >> from your experience, the scope of the problem? >> with companies having almost 75% of their value and tangible assets, including trade secrets, the problem is quite significant. in the create pwc report we attempted to put a figure to the magnitude of a problem looking at the different threat actors

that are involved and looking at the fact that u.s. companies other advanced economies rely on distributed supply chains increasingly and looked at other economic activity as a proxy for this. since it's a figure that is very difficult to get one's arms around because companies itself don't know the magnitude of the trade secrets they have and as well as when there is a trade secret theft. we looked at other examples of illicit activity, corruption and money laundering and similar threat actors and came of a figure of 1 to 3% of gdp, quite significant. >> thank you. mr. greenblatt? >> this problem is out of control. we need your help. being attacked daily. what this will have 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 and need your help. >> mr. norman? >> top that for clarity by the way. >> i'll try to add clarity myself. the issue is enormous. i can speak on behalf of form pharmaceutical firms that spend billions every year doing research and development. as we move forward and try to develop new lifesaving medicines, we continually build kmem cal platforms and pharmaceutical platforms in hopes of reaching a site where we can apply for patents. what we're seeing are 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. very often may take two or three or perhaps longer -- two or

three or longer years to do enough research to get to the single molecule that we'll be able to carry on into clinical trials. if we lose the trade secrets, and all of that formula, prior to the time we can reduce that to a patent application, the loss is ir revokable. we may spend 10, 20, $30 million building a chemical platform, rich diversity of a number of compounds and if any one of those is stolen from us prior to the time that we can obtain a patent on it, then it is lost forever. therefore the public and those citizens gets to enjoy the fruits of this research once it's gone. >> thank you very much. >> senator hatch. >> thank you, mr. chairman. >> i should say before you got here, your names were sung with praise over and over again for

the legislation, almost as if you were summoned here by those voices. >> that's always unusual. >> we're happy to have all of you here and you're also experts in your field. let me ask mr. norman to respond to this one. under u.s. law, protections for trade secrets are some of the most robust in the world. we're hoping to make those protections even stronger. but protecting trade secrets in numerous countries is a challenge it seems to me. facing many trans national companies, something i'm very concerned about. but now mr. norman and mr. hoffman, how will changes we make to u.s. law have an impact either positive or negative, on what other countries are doing in this area and do we need to

be careful here? mr. norman, you can go first? >> sure, thank you again senator hatch for the legislation that you have introduced. we greatly appreciate it. greatly appreciate your leadership. the instances of what it would do on a positive standpoint is that we believe that the legislation to obtain a federal trade secret remedy, particularly the ability to seek an ex-parte seizure of stolen materials and prevent further disclosure or divestment of that information broadly would be a very positive gold standard for future discussions on harm onization 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 aren't always set up to work very well along those lines. with a federal stand dard, with the appropriate type of control, i believe we can show the rest of the world what the goal stand dard 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. care to add anything? >> i totally agree with my colleague. any opportunity for our trade negotiationers to be able to point to improvements in trade secret law enprotection 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.

trade secrets also seem to be a lot more difficult to protect than patents. i understand there may be industry best practices and model policies but i imagine these vary widely based on information you're trying to protect. so i'm very interested in as a practical matter how do you determine what measures are reasonable to protect your trade secrets? >> well, we actually base that upon the reverse engineering capability of the innovation but once we decide to go the tad secret route, we have to have the processes and systems in place in order to assure that 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 domesticically and internationally is an area we have to be careful they have the same type of procedures in place and protect our intellectual property at the same level. >> yes. >> in our work with companies around the world, we found this is something that's not very mature. we laid out a five-step framework for companies to begin to get their arms around how to best handle their intellectual property. first being able to categorize what you have and where it is in this is critical. a small company or large company with global operations and also recommend that companies conduct a risk assessment and identify who are the primary threat actors and who's interested in their trade secrets and intellectual property and potential vulnerabilities in their policies and procedures and internal controls really looking inside of their company

and in their supply chain and identify the trade secrets with the greatest impact on the company's operations and business. also looking at the economic impact of a loss of a trade secret, understanding the magnitude that will have on their business. 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 kuhns. >> thank you senator whitehouse, thank you for chairing this hearing and for the great work that you and senator graham have done 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 at stake here of the $5 trillion of value, held in america's intellectual property and particularly in the form of trade secrets. we have criminal law, prosecutions for the protection of trade secret theft, economic

espionage act is 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 graham for their hard work in improving efforts to deal with that. the department of justice has many priorities and limited resources 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 good leader on this issue. >> same here, this young man has really done a really great job. >> even got a young man out of that. >> as a former intern, i remember i look forward to passing a bill with this nice young man, when i was mostly passing cups of coffee.

it is a tremendous sense of satisfaction that i've got through working with senator hatch and with eli lilly and 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 and protect trade secrets coalition for their very able and valued input as we crafted this bill and tried to get to a place that makes sense and that can help stem the gap in u.s. law to ensure we really vigorously defend trade secrets. let me ask some questions of the panel if i might. first, if i might mr. hoffman, boeg does business, most of the threats original nat from other countries around the world. can you speak to how respect for trade secret theft varies around the world and how our laws

domestically and what we might enact could influence the protection? >> i would be glad to. thank you for the question, senator coons. >> when you look at trade secret theft, it hurts boeing and other companies. but i think the best thing we can do is set the standard and provide the tools necessary for efficient and effective protection of trade secrets and get those standards to our trade negotiators to press the issue with their counterparts. >> i couldn't agree more and appreciate that response. if i might, mr. greenblatt, from marlin steel, a small manufacturer that has grown significantly. trade secret threat can pose a existent shal theft in a thief succeeds in stealing your secret sauce, it could mean the end of

the business, but for a firm like marlin steel, it could mean the end. securing your trade secrets and asserting your rights in court can also be significantly expensive relative to the size of your business. i saw this in my own experience. can you speak to how existence of a federal private right of action would reduce the cost of protecting trade secrets and have woun uniform standard might threat then your ability to go after those that steal your trade secrets. >> the defend trade secrets act is well drafted and will help us go around the state system, which is very inefficient and very slow and it's very expensive. lit companies can't afford having lawyers in five different states on retainers trying to go after a bad actor. it would be much more elegant if

we could have a federal jurisdiction on this matter, and much more efficient. the coon/hatch bill would tremendously accelerate our ability to stop bad actors and get good results. >> thank you, if i might mr. chairman, one last question of mr. norman. >> thank you again for your hard work and leadership and in particular one of the sections we worked on was the exparte injunkive relief. can you explain why it is important to eli lilly or others? >> yes, sir. we often run into situations where we find that an ex-employee has left and is going to work for a competitor and we finds out something such that in once they turn in their lilly issued computer that there's been a download of a number of documents which contain highly confidential

lilly trade secrets. these occurrences almost always happen on a late friday afternoon. and therefore, the best part i believe about the ex-parte seizure aspect of the bill that's currently pending is the fact that we could go to federal court and in one action kick out an ounce of prevention rather than worrying about a pound of cure a week or two later when we can get the indiana state courts involved or new jersey state courts involved or perhaps both indiana and new jersey state courts involved, leading to a whole lot more expense and whole lot more risk because we may not be able to isolate and seize the stolen materials as quickly. and therefore a federal cause of action before we can go to a single court and institute the power of the federal court

system to seize stolen materials would be extraordinarily helpful in those situations and i thank you for your leadership on this bill. >> thank you, mr. norman and miss passman, it's 150 to $450 billion a year trade secret theft is a big deal. your leadership is strengthening the criminal law protections for american countries is adds mirable and i very much look forward to working with you to pass the two bills in tandem in a way that can strengthen for millions of americans and thousands of companies. >> thank you. >> now lindsey graham. >> protecting the nation what i think is an inevitable cyber attack on a large scale, will we do something in time to diminish the effect? that's one problem the nation faces from criminal terrorist enterprises and potentially nation states and the other is

the private seng tore trying to do business in an inner connected and complicated world. one of the things that america has had going for her is that we're pretty innovative and always thinking outside the box. and other people pretty good at copying. from a criminal point of view, we're trying to put teeth into this area of the law. mr. hoffman, when you're overseas representing boeing on trying to do a joint venture, what do you worry about the most? if you're going -- some countries require you to have a 51% partner. is that correct? >> it varies by country. but in some cases you can have a majority share and some cases you can have a minority share. >> but you'll have a forced partnership based on the host country's laws. >> whatever the laws are, typically it is some type of partnership, yes. >> these partnerships are created by the host country, not of your own choosing, to do

business you have to have a local partner for lack of a better term. >> in general, yes, sir. >> how does the private sector and the government interact when there's a trade secret theft or intellectual property theft in a foreign country? what more can we do and how does that system work? >> i'm not an expert in those areas but i can tell you that we are very globally spread company and when we make the decision to go into a country and do business, we study the laws and how we need to establish ourselves as a business and are prepared to defend our trade secrets as best we can, knowing it's going to be a different environment than we have here at home in some cases. >> mr. norman, when you do business overseas and have a local partner, what is your biggest concern? >> the biggest concern of course is losing our trade secrets and

losing the value of all of the investment that we put in -- >> having a company across the street from where you're located doing exactly the same thing you're doing? >> right. that's always an issue and therefore we're quite sir couple inspect about the type of research and development or disclosure we make in many of the partnered institutions where we do business outside the united states. >> if we had laws on our books that would hold a country or individual acting on behalf of af nation state liable for engaging in that theft, do you think it would make business easier for doing overseas? >> i believe it would if we can use that by the standard in which we could get other countries to change laws and harmonnize them with the way we would like trade secrets protected, yes. >> is it fair to say in the international arena, when it comes to protecting trade secrets, many in countries it's a wild, wild west.

>> there's definitely a different threat levels out there and i agree with my colleague that we choose carefully what type of work and intellectual property we do outside of the united states. >> the more we can get this right, the more opportunity to create jobs here at home and abroad. is this an i am pediment to job creation? >> i believe any time we lose the fruits and labors that our scientists and engineers put into developing drug products it is a huge jobs issue. we employ thousands of scientists and engineers who work years trying to develop a drug product and if a competitor can take that away from us right before we cross the finish line it's devastating. >> i want to thank chairman whitehouse, never known any one more knowledgeable. i look forward to see if we can get our bill finished. >> pleasure working with senator

graham on a variety of issue and thank him for his leadership. senator flake? >> thank you for being here. i apologize for not being here earlier. i hope i'm not plowing old ground here. but i'm concerned about the rate at which trade secrets are being stolen internationally as opposed to domestically and trying to get some sense of that. i've introduced legislation and future of america innovation and research act which allows the owner of trade secret to bring action if the bad actor is located abroad or acting on behalf of an enty. miss passman, there was a recent rereport that cited a survey that was asked to comment on attempts to compromise trade secrets information or the nationality of the primary

beneficiary of the theft was known 70%, foreign individuals firms or government that were those beneficiaries. do you see this as a growing problem that the foreign nature ever the threat? >> certainly in an integrated economy, we're going to increasingly see the challenge for trade secrets. you know, american companies benefit from having participate in these global supply chains and as they move their business overseas, whether it's a supplier overseas or a customer overseas, they need to understand the global environment in which they are working. we're working with companies around the world, including with companies in china and other emerging markets that also want to mature their systems and better protect intellectual property. but we advise companies to understand the environment that they are entering and to put

business processes in place to better protects and manage intellectual property inside of their business as well as with their supply chain. >> thank you, mr. hoffman, your testimony you note that one of the fi cases doj prosecuted under section 1831 was against the defendant who stole trade secrets from boeing related to the space shuttle and the delta 4 rocket to benefit a foreign entity. you also seen an uptick in this foreign activity? >> well, that particular case the gentleman was charged with stealing our trade secrets, there was no particular focus on what happened to those. in fact, once it leaves, of course the damage has been done. i might defer to our department of justice colleagues regarding those issues. >> all right. what is boeing specifically doing to combat this? what measures have you taken -- sorry if i'm plowing old ground

here. >> in terms of our overseas presence? >> yes. >> we hold our subsidiaries and our relationships with partners to the same level we have in the united states. the complexities are that we're in a different country and we have to adhere to their laws and they may not be as harmonized and effective as ours. >> do you think it's important to have legislation that protects both domestic and foreign trade secret theft, do all of you agree with that? good. we'll proceed with the legislation. i appreciate -- >> everybody nodded for the record. >> okay, good. >> if you can do that more awedably next time that would be great. thank you for your testimony. >> let me ask one last -- maybe two last questions of everybody. there's been some reluctance on the part of corporate victims of

trade secret theft to engage in the criminal law enforcement process, one of the things that we've heard has been that taking that step rather than simply trying to bury things could actually make matters worse as the trade secret rattled around through the case and became mor secrecy and its advantage. is that something that is a real concern? are there any other concerns we should be looking at in terms of things having to do with the process of a criminal case that are deterring criminal victims from taking advantage of that means of redress? mr. norman?

>> yes, chairman whitehouse, that is very much a deep concern we have as we look at the ken of criminal prosecution arising from the disclosure of trade secrets outside the bounds of our corporate entity. and i applaud you particularly for the language that you have in your legislation concerning the ability to protect the trade secret, even during the time that the court is reviewing. because it is often difficult to question witnesses. it's very difficult to come forward with documentation. it's very difficult to seek expert testimony that can help prove that a theft has occurred if you can't talk about specifically in open court what the means of the disclosure was or what the subject matter of the disclosure was.

because once it's made its way into open court, it is no longer a trade secret, and you lose it anyway. and so, many of the mechanisms that have been proposed and the mechanism in particular that i have seen in your legislation i believe is a great leap forward in helping us move into an arena where we could help prosecute these cases much more readily than we've been able to in the past, and i thank you for that. >> final question for mr mr. greenblat. you indicated earlier that one of the things that we as senators should focus on is improving coordination among the agencies. you used the term silos. when i go out to the unofficially termed fusion centers, if you will, where the fbi, for instance, leads one, and homeland security, and they've got all the agencies there, they've got everybody

represented, that's all up on screens, it looks like a model of interagency cooperation, at least at that level, obviously you had a different experience down at the level of the attacks on your company and the experience that you had. could you articulate more specifically exactly what your concerns were about the silo problem and the problems of coordination? >> so, for example, if we identify -- if the fbi identifies a bad actor, we would like that that company can't import things into america and the customs, you know, agency halts their products from coming into america. the only way we're going to get their attention is by the wallet. and if we could stop them from shipping into the greatest, biggest economy in the world, we'll get their attention. >> okay.

so you're not -- your experience wasn't that on the investigative side there was discoordination. rather that, when a case is done, you should be able to have as a remedy that the company doesn't get to import goods? that's an additional penalty for them? >> precisely. we just want everybody to work together and quickly resolve these top ticks, and we just can't have each agency in their own little zone. we have to have everybody working together and collaborate as much as possible, and then we have to stop these bad actors from bringing their parts into america. >> all right. well, let me thank all of the witnesses for coming in. this is a very helpful process for us. we have a lot of things going for us with this legislation. for one thing, it's a real issue. it's causing americans to be hurt in very concrete and meaningful ways. second, as you've seen today, couldn't be more bipartisan.

so i don't see us getting dragged into the partisan turmoil. we're following regular order and having proper hearings and so forth so that we can pull this together and move it forward. but i hope very much that we'll be able to make progress, and the advice and the counsel of all of you who are here -- some of whom have been very helpful in the preparation of the legislation as well as in testimony about it -- is something that we're all very grateful for. i think senator flake, senator hatch, senator kuehne, senator graham and myself have put effort into addressing aspects of this problem, and i'm confident we'll work together to solve this problem so that you have one less thing to worry about, and you can focus your considerable skills on making the best products in the world and expanding your businesses. thank you very much. the hearing will stay open for an additional week for anybody who wishes to add anything, but subject to that, we are

adjourned. is an hour.

>> good afternoon, and welcome. i am an adjunct professor at the george washington university school of media and public affairs, a former international bureau chief for the associated press and the 107th president of the national press club. the world's leading organization committed to our profession's future through our programming with the events such as this well fostering of free press worldwide. for more information about the national press club, please visit our website. on behalf of our members worldwide i would like to welcome our speaker and those of you attending today's event. our head table includes guess of our speaker as well as working

journalists or club members. if you hear applause in our audience, not that members of the general public are attending, so it is not necessarily evidence of a lack of journalistic object to the. i would also like to welcome our c-span and public radio audiences. you can follow the action on twitter. we will have a question and answer that will ask as many as time permits. it is time to introduce our head tables. i ask each of you to a stand briefly as a name is announced. from your right, jonathan sunland, political reporter for bloomberg news and a former national press club president. pomelos sanchez, washington producer, correspondent for univision. robbers schlesinger, managing editor, opinion, u.s. news and world report.

andrew bakes, resident scholar american enterprise institute and a guest of our speaker. marilyn thompson, washington bureau chief for thompson riders a macias sun says, partner and co-chair, government affairs practice group. a guest of our speaker. vice chair of the npc speakers' committee, a correspondent for "usa today" and a past president of the national press club. skipping over our speaker for a moment, the speaker's dining member who organized this luncheon. thank you very much. senior research fellow george mason university. chief correspondent "washington post". betsy fisher martin, senior

executive producer and managing editor of political programming for fec news. susan page, washington bureau chief, "usa today". larry lippman, executive editor for state news at the aarp bulletin and passed in pc president. [applause] marco rubio has served as florida's junior senator since january 200011. a native of miami, he previously served in the florida house of representatives from 2000 until 2008 to during which time you serve as majority whip, majority leader, and speaker. first term florida senator mark arubia is one of the many republicans positioning themselves for the presidential primary. this past