Information Security: Cyber Threats Facilitate Ability to Commit Economic Espionage

Published by the Government Accountability Office on 2012-06-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                             United States Government Accountability Office

GAO                          Testimony
                             Before the Subcommittee on
                             Counterterrorism and Intelligence,
                             Committee on Homeland Security, House
                             of Representatives
                             INFORMATION SECURITY
For Release on Delivery
Expected at 10:00 a.m. EDT
Thursday, June 28, 2012

                             Cyber Threats Facilitate
                             Ability to Commit
                             Economic Espionage
                             Statement of Gregory C. Wilshusen, Director
                             Information Security Issues

                                               June 28, 2012

                                               INFORMATION SECURITY
                                               Cyber Threats Facilitate Ability to Commit
                                               Economic Espionage
Highlights of GAO-12-876T, a testimony
before the Subcommittee on Counterterrorism
and Intelligence, Committee on Homeland
Security, House of Representatives

Why GAO Did This Study                         What GAO Found
The threat of economic espionage—              The nation faces an evolving array of cyber-based threats arising from a variety
the theft of U.S. proprietary                  of sources. These sources include criminal groups, hackers, terrorists,
information, intellectual property (IP),       organization insiders, and foreign nations engaged in crime, political activism, or
or technology by foreign companies,            espionage and information warfare. These threat sources vary in terms of the
governments, or other actors—has               capabilities of the actors, their willingness to act, and their motives, which can
grown. Moreover, dependence on                 include monetary gain or political advantage, among others. Moreover, potential
networked information technology (IT)          threat actors have a variety of attack techniques at their disposal, which can
systems has increased the reach and            adversely affect an organization’s computers or networks and be used to
potential impact of this threat by
                                               intercept or steal valuable information. The magnitude of the threat is
making it possible for hostile actors to
                                               compounded by the ever-increasing sophistication of cyber attack techniques,
quickly steal massive amounts of
information while remaining
                                               such as attacks that may combine multiple techniques. Using these techniques,
anonymous and difficult to detect. To          threat actors may target individuals and businesses, resulting in, among other
address this threat, federal agencies          things, loss of sensitive personal or proprietary information.
have a key role to play in law                 These concerns are highlighted by reports of cyber incidents that have had
enforcement, deterrence, and                   serious effects on consumers and businesses. These include the compromise of
information sharing. Consistent with           individuals’ sensitive personal data such as credit- and debit-card information
this threat, GAO has designated                and the theft of businesses’ IP and other proprietary information. While difficult to
federal information security as a
                                               quantify monetarily, the loss of such information can result in identity theft; lower-
governmentwide high-risk area since
                                               quality counterfeit goods; lost sales or brand value to businesses; and lower
1997 and in 2003 expanded it to
include protecting systems and assets          overall economic growth and declining international trade.
vital to the nation (referred to as critical   To protect against these threats, a variety of security controls and other
infrastructures). GAO was asked to             techniques are available. These include technical controls such as those that
testify on the cyber aspects of                manage access to systems, ensure system integrity, and encrypt sensitive data.
economic espionage. Accordingly, this          But they also include risk management and strategic planning that organizations
statement discusses (1) cyber threats          undertake to improve their overall security posture and reduce their exposure to
facing the nation’s systems, (2)
                                               risk. Further, effective public-private partnerships are a key element for, among
reported cyber incidents and their
                                               other things, sharing information about threats.
impacts, (3) security controls and other
techniques available for reducing risk,        Multiple federal agencies undertake a wide range of activities in support of IP
and (4) the responsibilities of key            rights. Some of these agencies include the Departments of Commerce, Justice,
federal entities in support of protecting      and Homeland Security, among others. For example, components within the
IP. To do this, GAO relied on                  Justice Department and the Federal Bureau of Investigation are dedicated to
previously published work in this area,        fighting computer-based threats to IP. In addition, both Congress and the
as well as reviews of reports from other       Administration have established interagency mechanisms for better coordinating
federal agencies, media reports, and           the protection of IP. Ensuring effective coordination will be critical for better
other publicly available sources.
                                               protecting the economic security of America’s businesses.
What GAO Recommends
In prior reports, GAO has made
hundreds of recommendations to
better protect federal systems, critical
infrastructures, and intellectual

View GAO-12-876T. For more information,
contact Gregory C. Wilshusen (202) 512-6244
or wilshuseng@gao.gov.

                                                                                         United States Government Accountability Office
Chairman Meehan, Ranking Member Higgins, and Members of the

Thank you for the opportunity to testify at today’s hearing on the threat of
economic espionage facing U.S. businesses.

The threat of economic espionage 1 is not new. In April 1992, we testified
that the theft of U.S. proprietary information or technology by foreign
companies has long been a part of the competitive business
environment. 2 We also testified that the unauthorized acquisition of U.S.
proprietary or other information by foreign governments to advance their
countries’ economic position was growing.

Today, this threat continues to grow. According to the Federal Bureau of
Investigation (FBI), the theft of intellectual property (IP) 3—products of
human intelligence and creativity—is a growing threat which is
heightened by the rise of the use of digital technologies. 4 The increasing
dependency upon information technology (IT) systems and networked
operations pervades nearly every aspect of our society. In particular,
increasing computer interconnectivity—most notably growth in the use of
the Internet—has revolutionized the way that our government, our nation,
and much of the world communicate and conduct business. While
bringing significant benefits, this dependency can also create

 According to the Office of the National Counterintelligence Executive, economic
espionage occurs when an actor, knowing or intending that his or her actions will benefit
any foreign government, instrumentality or agent, knowingly: (1) steals, or without
authorization appropriates, carries away, conceals, or obtains by deception or fraud a
trade secret; (2) copies, duplicates, reproduces, destroys, uploads, downloads, or
transmits that trade secret without authorization; or (3) receives a trade secret knowing
that the trade secret had been stolen, appropriated, obtained or converted without
authorization. See Foreign Spies Stealing U.S. Economic Secrets in Cyberspace: Report
to Congress on Foreign Economic Collection and Industrial Espionage, 2009-2011
(October 2011).
 GAO, Economic Espionage: The Threat to U.S. Industry, Testimony before the
Subcommittee on Economic and Commercial Law, Committee on the Judiciary, House of
Representatives, GAO/T-OSI-92-6 (April 29, 1992).
 Intellectual property is a category of legal rights that grants owners certain exclusive
rights to intangible assets or products of the human intellect, such as inventions; literary
and artistic works; and symbols, names, images, and design.
 See the FBI’s website on cybercrime and intellectual property theft at

Page 1                                                         GAO-12-876T Cyber Espionage
vulnerabilities to cyber-based threats. Cyber attacks are one way that
threat actors—whether nations, companies, or criminals—can target the
intellectual property and other sensitive information of federal agencies
and American businesses. According to the Office of the National
Counterintelligence Executive, sensitive U.S. economic information and
technology are targeted by intelligence services, private sector
companies, academic and research institutions, and citizens of dozens of
countries. 5 To help address this threat, federal agencies have a key role
to play in law enforcement, deterrence, and information sharing.
Underscoring the importance of this issue, we have designated federal
information security as a high-risk area since 1997 and in 2003 expanded
this area to include protecting computerized systems supporting our
nation’s critical infrastructure. 6

In my testimony today, I will describe (1) cyber threats facing the nation’s
systems, (2) reported cyber incidents and their impacts, (3) security
controls and other techniques available for reducing risk, and (4) the
responsibilities of key federal entities in support of improving the
protection of intellectual property. In preparing this statement in June
2012, we relied on our previous work in these areas. (Please see the
related GAO products in appendix II.) These products contain detailed
overviews of the scope and methodology we used. We also reviewed
relevant reports from the Department of Justice and Office of the National
Counterintelligence Executive, and information on security incidents,
including those involving economic espionage, from the U.S. Computer
Emergency Readiness Team (US-CERT), media reports, and other
publicly available sources. The work on which this statement is based
was conducted in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform
audits to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives. We
believe that the evidence obtained provided a reasonable basis for our
findings and conclusions based on our audit objectives.

 Office of the National Counterintelligence Executive, Foreign Spies Stealing US
Economic Secrets in Cyberspace.
 See, most recently, GAO, High-Risk Series: An Update, GAO-11-278 (Washington, D.C.:
February 2011).

Page 2                                                     GAO-12-876T Cyber Espionage
                                        As computer technology has advanced, both government and private
Background                              entities have become increasingly dependent on computerized
                                        information systems to carry out operations and to process, maintain, and
                                        report essential information. Public and private organizations rely on
                                        computer systems to transmit sensitive and proprietary information,
                                        develop and maintain intellectual capital, conduct operations, process
                                        business transactions, transfer funds, and deliver services. In addition,
                                        the Internet has grown increasingly important to American business and
                                        consumers, serving as a medium for hundreds of billions of dollars of
                                        commerce each year.

                                        Consequently, ineffective information security controls can result in
                                        significant risks, including

                                        •    loss or theft of resources, including money and intellectual property;
                                        •    inappropriate access to and disclosure, modification, or destruction of
                                             sensitive information;
                                        •    use of computer resources for unauthorized purposes or to launch
                                             attacks on other computers systems;
                                        •    damage to networks and equipment;
                                        •    loss of business due to lack of customer confidence; and
                                        •    increased costs from remediation.

                                        Cyber-based threats are evolving and growing and arise from a wide
The Nation Faces an                     array of sources. These sources include business competitors, corrupt
Evolving Array of                       employees, criminal groups, hackers, and foreign nations engaged in
                                        espionage and information warfare. These threat sources vary in terms of
Cyber-Based Threats                     the capabilities of the actors, their willingness to act, and their motives,
                                        which can include monetary gain or political advantage, among others.
                                        Table 1 shows common sources of cyber threats.

Table 1: Sources of Cybersecurity Threats

Threat source                  Description
Bot-network operators          Bot-net operators use a network, or bot-net, of compromised, remotely controlled systems to
                               coordinate attacks and to distribute phishing schemes, spam, and malware attacks. The services of
                               these networks are sometimes made available on underground markets (e.g., purchasing a denial-
                               of-service attack or services to relay spam or phishing attacks).
Business competitors           Companies that compete against or does business with a target company may seek to obtain
                               sensitive information to improve their competitive advantage in various areas, such as pricing,
                               manufacturing, product development, and contracting.

                                        Page 3                                                        GAO-12-876T Cyber Espionage
Threat source                   Description
Criminal groups                 Criminal groups seek to attack systems for monetary gain. Specifically, organized criminal groups
                                use spam, phishing, and spyware/malware to commit identity theft, online fraud, and computer
Hackers                         Hackers break into networks for the thrill of the challenge, bragging rights in the hacker community,
                                revenge, stalking, monetary gain, and political activism, among other reasons. While gaining
                                unauthorized access once required a fair amount of skill or computer knowledge, hackers can now
                                download attack scripts and protocols from the Internet and launch them against victim sites. Thus,
                                while attack tools have become more sophisticated, they have also become easier to use.
                                According to the Central Intelligence Agency, the large majority of hackers do not have the requisite
                                expertise to threaten difficult targets such as critical U.S. networks. Nevertheless, the worldwide
                                population of hackers poses a relatively high threat of an isolated or brief disruption causing serious
Insiders                        The disgruntled or corrupt organization insider is a source of computer crime including economic
                                espionage. Insiders may not need a great deal of knowledge about computer intrusions because
                                their knowledge of a target system often allows them to gain unrestricted access to cause damage
                                to the system or to steal system data. The insider threat includes contractors hired by the
                                organization, as well as careless or poorly trained employees who may inadvertently introduce
                                malware into systems.
International corporate spies   International corporate spies pose a threat to the United States through their ability to conduct
                                economic and industrial espionage and large-scale monetary theft and to hire or develop hacker
Nations                         Nations use cyber tools as part of their information-gathering and espionage activities, including
                                economic espionage directed against U.S businesses. In addition, several nations are aggressively
                                working to develop information warfare doctrine, programs, and capabilities. In his January 2012
                                testimony, the Director of National Intelligence stated that, among state actors, China and Russia
                                are of particular concern.
Phishers                        Individuals or small groups execute phishing schemes in an attempt to steal identities or
                                information for monetary gain. Phishers may also use spam and spyware or malware to accomplish
                                their objectives.
Spammers                        Individuals or organizations distribute unsolicited e-mail with hidden or false information in order to
                                sell products, conduct phishing schemes, distribute spyware or malware, or attack organizations
                                (e.g., a denial of service).
Spyware or malware authors      Individuals or organizations with malicious intent carry out attacks against users by producing and
                                distributing spyware and malware. Several notable destructive computer viruses and worms have
                                harmed files and hard drives, including the Melissa Macro Virus, the Explore.Zip worm, the CIH
                                (Chernobyl) Virus, Nimda, Code Red, Slammer, and Blaster.
Terrorists                      Terrorists seek to destroy, incapacitate, or exploit critical infrastructures in order to threaten national
                                security, cause mass casualties, weaken the economy, and damage public morale and confidence.
                                Terrorists may use phishing schemes or spyware/malware in order to generate funds or gather
                                sensitive information.
                                          Source: GAO analysis based on data from the Director of National Intelligence, Department of Justice, Central Intelligence Agency,
                                          National Institute of Standards and Technology, and the Software Engineering Institute’s CERT® Coordination Center.
                                           According to the Office of the National Counterintelligence Executive, industrial espionage, or theft of
                                          trade secrets, occurs when an actor, intending or knowing that his or her offense will injure the owner
                                          of a trade secret of a product produced for or placed in interstate or foreign commerce, acts with the
                                          intent to convert that trade secret to the economic benefit of anyone other than the owner. See
                                          Foreign Spies Stealing U.S. Economic Secrets in Cyberspace.

                                          Page 4                                                                                   GAO-12-876T Cyber Espionage
                                           These sources of cyber threats make use of various techniques, or
                                           exploits, to adversely affect an organization’s computers, software, or
                                           networks, or to intercept or steal valuable or sensitive information. Table 2
                                           provides descriptions of common types of cyber exploits.

Table 2: Types of Cyber Exploits

Type of exploit                             Description
Cross-site scripting                        An attack that uses third-party web resources to run script within the victim’s web
                                            browser or scriptable application. This occurs when a browser visits a malicious website
                                            or clicks a malicious link. The most dangerous consequences occur when this method is
                                            used to exploit additional vulnerabilities that may permit an attacker to steal cookies
                                            (data exchanged between a web server and a browser), log key strokes, capture screen
                                            shots, discover and collect network information, and remotely access and control the
                                            victim’s machine.
Denial-of-service                           An attack that prevents or impairs the authorized use of networks, systems, or
                                            applications by exhausting resources.
Distributed denial-of-service               A variant of the denial-of-service attack that uses numerous hosts to perform the attack.
Logic bombs                                 A piece of programming code intentionally inserted into a software system that will cause
                                            a malicious function to occur when one or more specified conditions are met.
Phishing                                    A digital form of social engineering that uses authentic-looking, but fake, e-mails to
                                            request information from users or direct them to a fake website that requests information.
Passive wiretapping                         The monitoring or recording of data, such as passwords transmitted in clear text, while
                                            they are being transmitted over a communications link. This is done without altering or
                                            affecting the data.
Structured Query Language (SQL) injection An attack that involves the alteration of a database search in a web-based application,
                                          which can be used to obtain unauthorized access to sensitive information in a database.
Trojan horse                                A computer program that appears to have a useful function, but also has a hidden and
                                            potentially malicious function that evades security mechanisms by, for example,
                                            masquerading as a useful program that a user would likely execute.
Virus                                       A computer program that can copy itself and infect a computer without the permission or
                                            knowledge of the user. A virus might corrupt or delete data on a computer, use e-mail
                                            programs to spread itself to other computers, or even erase everything on a hard disk.
                                            Unlike a computer worm, a virus requires human involvement (usually unwitting) to
War driving                                 The method of driving through cities and neighborhoods with a wireless-equipped
                                            computer– sometimes with a powerful antenna–searching for unsecured wireless
Worm                                        A self-replicating, self-propagating, self-contained program that uses network
                                            mechanisms to spread itself. Unlike computer viruses, worms do not require human
                                            involvement to propagate.
Zero-day exploit                            An exploit that takes advantage of a security vulnerability previously unknown to the
                                            general public. In many cases, the exploit code is written by the same person who
                                            discovered the vulnerability. By writing an exploit for the previously unknown
                                            vulnerability, the attacker creates a potent threat since the compressed timeframe
                                            between public discoveries of both makes it difficult to defend against.
                                           Source: GAO analysis of data from the National Institute of Standards and Technology, United States Computer Emergency Readiness
                                           Team, and industry reports.

                                           Page 5                                                                               GAO-12-876T Cyber Espionage
                        Cyberspace—where much business activity and the development of new
                        ideas often take place—amplifies these threats by making it possible for
                        malicious actors to quickly steal and transfer massive quantities of data
                        while remaining anonymous and difficult to detect. 7 For example, cyber
                        attackers do not need to be physically close to their victims, technology
                        allows attacks to easily cross state and national borders, attacks can be
                        carried out at high speed and directed at a number of victims
                        simultaneously, and cyber attackers can more easily remain anonymous.
                        Moreover, the use of these and other techniques is becoming more
                        sophisticated, with attackers using multiple or “blended” approaches that
                        combine two or more techniques. Using such techniques, threat actors
                        may target individuals, resulting in loss of privacy or identity theft;
                        businesses, resulting in the compromise of proprietary information or
                        intellectual property; critical infrastructures, resulting in their disruption or
                        destruction; or government agencies, resulting in the loss of sensitive
                        information and damage to economic and national security.

                        Reports of cyber incidents affecting both public and private institutions are
Reported Cyber-         widespread. The U.S. Computer Emergency Readiness Team (US-
Incidents Illustrate    CERT) receives computer security incident reports from federal agencies,
                        state and local governments, commercial enterprises, U.S. citizens, and
Serious Risk to the     international computer security incident response teams. In its fiscal year
Security of             2011 report to Congress on implementation of the Federal Information
                        Security Management Act of 2002, the Office of Management and Budget
Intellectual Property   reported that US-CERT received over 100,000 total incident reports in
and Other Sensitive     fiscal year 2011. Over half of these (about 55,000) were phishing exploits;
Economic                other categories of incidents included virus/Trojan horse/worm/logic
                        bombs; malicious websites; policy violations; equipment theft or loss;
Information             suspicious network activity; attempted access; and social engineering.

                        Private sector organizations have experienced a wide range of incidents
                        involving data loss or theft, economic loss, computer intrusions, and
                        privacy breaches, underscoring the need for improved security practices.
                        The following examples from news media and other public sources
                        illustrate that a broad array of information and assets remain at risk.

                         Office of the National Counterintelligence Executive, Foreign Spies Stealing U.S.
                        Economic Secrets in Cyberspace.

                        Page 6                                                      GAO-12-876T Cyber Espionage
•   In March 2012, it was reported that a security breach at Global
    Payments, a firm that processed payments for Visa and Mastercard,
    could compromise the credit- and debit-card information of millions of
    Americans. Subsequent to the reported breach, the company’s stock
    fell more than 9 percent before trading in its stock was halted. Visa
    also removed the company from its list of approved processors.
•   In March 2012, it was reported that Blue Cross Blue Shield of
    Tennessee paid out a settlement of $1.5 million to the U.S.
    Department of Health and Human Services arising from potential
    violations stemming from the theft of 57 unencrypted computer hard
    drives that contained protected health information of over 1 million
•   In April 2011, Sony disclosed that it suffered a massive breach in its
    video game online network that led to the theft of personal
    information, including the names, addresses, and possibly credit card
    data belonging to 77 million user accounts.
•   In February 2011, media reports stated that computer hackers had
    broken into and stolen proprietary information worth millions of dollars
    from the networks of six U.S. and European energy companies.
•   A retailer reported in May 2011 that it had suffered a breach of its
    customers’ card data. The company discovered tampering with the
    personal identification number (PIN) pads at its checkout lanes in
    stores across 20 states.
•   In mid-2009 a research chemist with DuPont Corporation reportedly
    downloaded proprietary information to a personal e-mail account and
    thumb drive with the intention of transferring this information to Peking
    University in China and also sought Chinese government funding to
    commercialize research related to the information he had stolen.
•   Between 2008 and 2009, a chemist with Valspar Corporation
    reportedly used access to an internal computer network to download
    secret formulas for paints and coatings, reportedly intending to take
    this proprietary information to a new job with a paint company in
    Shanghai, China.
•   In December 2006, a product engineer with Ford Motor Company
    reportedly copied approximately 4,000 Ford documents onto an
    external hard drive in order to acquire a job with a Chinese automotive
These incidents illustrate the serious impact that cyber threats can have
on, among other things, the security of sensitive personal and financial
information and proprietary information and intellectual property. While
these effects can be difficult to quantify monetarily, they can include any
of the following:

Page 7                                             GAO-12-876T Cyber Espionage
                                     •   For consumers or private citizens: identity theft or compromise of
                                         personal and economic information and costs associated with lower-
                                         quality counterfeit or pirated goods.
                                     •   For business: lost sales, lost brand value or damage to public image,
                                         cost of intellectual property protection, and decreased incentive to
                                         invest in research and development.
                                     •   For the economy as a whole: lower economic growth due to reduced
                                         incentives to innovate and lost revenue from declining U.S. trade with
                                         countries that have weak IP rights regimes.

                                     The prevalence of cyber threats and the risks they pose illustrate the
Security Controls and                need for security controls and other actions that can reduce
Other Techniques Can                 organizations’ vulnerability to such attacks. As we have reported, there
                                     are a number of cybersecurity technologies that can be used to better
Reduce Vulnerability                 protect systems from cyber attacks, including access control
to Cyber-Based                       technologies, system integrity technologies, cryptography, audit and
Attacks                              monitoring tools, and configuration management and assurance
                                     technologies. 8 In prior reports, we have made hundreds of
                                     recommendations to federal agencies to better protect their systems and
                                     cyber-reliant critical infrastructures. Table 3 summarizes some of the
                                     common cybersecurity technologies, categorized by the type of security
                                     control they help to implement.

Table 3: Common Cybersecurity Technologies

Category                              Technology                         What it does
Access control
        Boundary protection           Firewalls                          Control access to and from a network or computer.
         Authentication               Biometrics                         Uses human characteristics, such as fingerprints,
                                                                         irises, and voices, to establish the identity of the
        Authorization                 User rights and privileges         Allow or prevent access to data and systems and
                                                                         actions of users based on the established policies of
                                                                         an organization.
System integrity                      Antivirus software                Provides protection against malicious code, such as
                                                                        viruses, worms, and Trojan horses.

                                      GAO, Technology Assessment: Cybersecurity for Critical Infrastructure Protection,
                                     GAO-04-321 (Washington, D.C.: May 28, 2004).

                                     Page 8                                                       GAO-12-876T Cyber Espionage
Category                                  Technology                            What it does
Cryptography                              Digital signatures and certificates   Use public key cryptography to provide (1)
                                                                                assurance that both the sender and recipient of a
                                                                                message or transaction will be uniquely identified, (2)
                                                                                assurance that the data have not been accidentally
                                                                                or deliberately altered, and (3) verifiable proof of the
                                                                                integrity and origin of the data.
                                          Virtual private networks              Allow organizations or individuals in two or more
                                                                                physical locations to establish network connections
                                                                                over a shared or public network, such as the
                                                                                Internet, with functionality that is similar to that of a
                                                                                private network using cryptography.
Audit and monitoring                      Intrusion detection systems           Detect inappropriate, incorrect, or anomalous activity
                                                                                on a network or computer system.
                                          Intrusion prevention systems          Build on intrusion detection systems to detect attacks
                                                                                on a network and take action to prevent them from
                                                                                being successful.
                                          Computer forensics tools              Identify, preserve, extract, and document computer-
                                                                                based evidence.
Configuration management and assurance    Policy enforcement applications       Enable system administrators to engage in
                                                                                centralized monitoring and enforcement of an
                                                                                organization’s security policies.
                                          Network management                    Allow for the control and monitoring of networks,
                                                                                including management of faults, configurations,
                                                                                performance, and security.
                                          Scanners                              Analyze computers or networks for security
                                          Continuity of operations tools        Provide a complete backup infrastructure to maintain
                                                                                availability in the event of an emergency or during
                                                                                planned maintenance.
                                          Patch management                      Acquires, tests, and applies multiple patches to one
                                                                                or more computer systems.
                                         Source: GAO analysis.

                                         In addition, the use of an overall cybersecurity framework can assist in
                                         the selection of technologies to protect an organization against cyber
                                         attacks. Such a framework includes

                                         •     determining the business requirements for security;
                                         •     performing risk assessments;
                                         •     establishing a security policy;
                                         •     implementing a cybersecurity solution that includes people, process,
                                               and technology to mitigate identified security risks; and
                                         •     continuously monitoring and managing security.
                                         Risk assessments, which are central to this framework, help
                                         organizations determine which assets are most at risk and to identify

                                         Page 9                                                           GAO-12-876T Cyber Espionage
                        countermeasures to mitigate those risks. Risk assessment is based on a
                        consideration of threats and vulnerabilities that could be exploited to inflict

                        Even with such a framework, there often are competing demands for
                        cybersecurity investments. For example, for some companies, mitigating
                        physical risks may be more important than mitigating cyber risks. Further,
                        investing in cybersecurity technologies needs to make business sense. It
                        is also important to bear in mind the limitations of some cybersecurity
                        technologies and to be aware that their capabilities should not be
                        overstated. Technologies do not work in isolation. Cybersecurity solutions
                        make use of people, process, and technology. Cybersecurity technology
                        must work within an overall security process and be used by trained
                        personnel. We have also emphasized the importance of public-private
                        partnerships for sharing information and implementing effective
                        cybercrime prevention strategies. 9

                        Similarly, the Office of the National Counterintelligence Executive has
                        identified a series of “best practices in data protection strategies and due
                        diligence for corporations.” 10 These include developing an information
                        strategy; insider threat programs and awareness; effective data
                        management; network security, auditing, and monitoring; and contingency

                        Multiple federal agencies undertake a wide range of activities in support
Key Federal Agencies    of IP rights. Some of these agencies are the Departments of Commerce
Have Responsibilities   (including the U.S. Patent and Trademark Office), State, Justice
                        (including the FBI), Health and Human Services, and Homeland Security;
for Protecting          the U.S. Trade Representative; the U.S. Copyright Office; and the U.S.
Intellectual Property   International Trade Commission. In many cases, IP-related efforts
                        represent a small part of the agencies’ much broader missions.

                        A smaller number of agencies and their components are involved in
                        investigating IP violations and enforcing U.S. IP laws. For example, the

                         GAO, Cybercrime: Public and Private Entities Face Challenges in Addressing Cyber
                        Threats, GAO-07-705 (Washington, D.C.: June 22, 2007).
                         Office of the National Counterintelligence Executive, Foreign Spies Stealing U.S.
                        Economic Secrets in Cyberspace.

                        Page 10                                                    GAO-12-876T Cyber Espionage
Department of Justice’s (DOJ) U.S. attorneys offices, Criminal Division,
and the FBI investigate and prosecute federal IP crimes. DOJ established
the Computer Hacking and Intellectual Property program, which consists
of specially trained assistant U.S. attorneys to pursue IP cases. Each of
the 93 U.S. attorneys offices throughout the country have assistant U.S.
attorneys designated as Computer Hacking and Intellectual Property
coordinators, who are available to work on IP cases. In addition, DOJ has
created Computer Hacking and Intellectual Property units in 25 U.S.
attorney’s offices with histories of large IP case loads. DOJ’s Computer
Crime and Intellectual Property Section—based in Washington, D.C.—
consists of prosecutors devoted to enforcing computer crime and IP laws.
Computer Crime and Intellectual Property Section attorneys prosecute
cases, assist prosecutors and other investigative agents in the field, and
help develop and implement an overall criminal enforcement strategy.
The FBI’s Cyber Division oversees the bureau’s IP enforcement efforts;
though not all of its IP investigations are cyber-related.

Over the years, Congress and the administration have created
interagency mechanisms to coordinate federal IP law enforcement efforts.
These include the National Intellectual Property Law Enforcement
Coordination Council (NIPLECC), created in 1999 to coordinate U.S. law
enforcement efforts to protect and enforce IP rights in the United States
and abroad and the Strategy for Targeting Organized Piracy initiative,
created by the President in 2004 to target cross-border trade in tangible
goods and strengthen U.S. government and industry IP enforcement
action. In December 2004, Congress passed legislation to enhance
NIPLECC’s mandate and created the position of the Coordinator for
International Intellectual Property Enforcement, located within the
Department of Commerce, to lead NIPLECC. In November 2006 we
reported that NIPLECC continued to face persistent difficulties, creating
doubts about its ability to carry out its mandate. 11 We also noted that
while the Strategy for Targeting Organized Piracy had brought attention
and energy to IP efforts within the U.S. government, it had limited
usefulness as a tool to prioritize, guide, implement, and monitor the
combined efforts of multiple agencies.

 GAO, Intellectual Property: Strategy for Targeting Organized Piracy (STOP) Requires
Changes for Long-term Success, GAO-07-74 (Washington, D.C.: Nov. 8, 2006).

Page 11                                                  GAO-12-876T Cyber Espionage
In 2008, Congress passed the Prioritizing Resources and Organization for
Intellectual Property Act (PRO-IP Act), which, among other things,
created the position of the Intellectual Property Enforcement Coordinator
(IPEC) to serve within the Executive Office of the President. The duties of
the coordinator outlined in the act include specific efforts to enhance
interagency coordination, such as the development of a comprehensive
joint strategic plan. The act also required the Attorney General to devote
additional resources to IP enforcement and undertake other IP-
enforcement-related efforts. In October 2010, we noted that DOJ and FBI
officials and Office of the IPEC staff reported taking many actions to
implement the requirements of the PRO-IP Act. 12 Moreover, the IPEC
coordinated with other federal entities to deliver the 2010 Joint Strategic
Plan on Intellectual Property Enforcement to Congress and the public. We
reported that the plan addressed the content requirements of the act, but
that enhancements were needed, such as identifying responsible
departments and entities for all action items and estimates of resources
needed to carry out the plan’s priorities. Accordingly, we recommended
that the IPEC take steps to ensure that future strategic plans address
these elements. IPEC staff generally concurred with our findings and

In summary, the ongoing efforts to steal U.S. companies’ intellectual
property and other sensitive information are exacerbated by the ever-
increasing prevalence and sophistication of cyber-threats facing the
nation. Recently reported incidents show that such actions can have
serious impact not only on individual businesses, but on private citizens
and the economy as a whole. While techniques exist to reduce
vulnerabilities to cyber-based threats, these require strategic planning by
affected entities. Moreover, effective coordination among federal
agencies responsible for protecting IP and defending against cyber-
threats, as well as effective public-private partnerships, are essential
elements of any nationwide effort to protect America’s businesses and
economic security.

  GAO, Intellectual Property: Agencies Progress in Implementing Recent Legislation, but
Enhancements Could Improve Future Plans, GAO-11-39 (Washington, D.C.: Oct. 13,

Page 12                                                    GAO-12-876T Cyber Espionage
Chairman Meehan, Ranking Member Higgins, and Members of the
Subcommittee, this concludes my statement. I would be happy to answer
any questions you have at this time.

Page 13                                       GAO-12-876T Cyber Espionage
Appendix I: Contact and Acknowledgments
             Appendix I: Contact and Acknowledgments

             If you have any questions regarding this statement, please contact
             Gregory C. Wilshusen at (202) 512-6244 or wilshuseng@gao.gov. Other
             key contributors to this statement include Michael Gilmore and Anjalique
             Lawrence (Assistant Directors), Bradley Becker, Kush Malhotra, and Lee
             A. McCracken.

             Page 14                                         GAO-12-876T Cyber Espionage
Appendix II: Related GAO Products
              Appendix II: Related GAO Products

              Cybersecurity: Threats Impacting the Nation. GAO-12-666T. Washington,
              D.C.: April 24, 2012

              IT Supply Chain: National Security-Related Agencies Need to Better
              Address Risks. GAO-12-361. Washington, D.C.: March 23, 2012.

              Critical Infrastructure Protection: Cybersecurity Guidance Is Available, but
              More Can Be Done to Promote Its Use. GAO-12-92. Washington, D.C.:
              December 9, 2011.

              Cybersecurity: Continued Attention Needed to Protect Our Nation’s
              Critical Infrastructure. GAO-11-865T. Washington, D.C.: July 26, 2011.

              High-Risk Series: An Update. GAO-11-278. Washington, D.C.: February

              Electricity Grid Modernization: Progress Being Made on Cybersecurity
              Guidelines, but Key Challenges Remain to be Addressed. GAO-11-117.
              Washington, D.C.: January 12, 2011.

              Intellectual Property: Agencies Progress in Implementing Recent
              Legislation, but Enhancements Could Improve Future Plans. GAO-11-39.
              Washington, D.C.: October 13, 2010.

              Critical Infrastructure Protection: Key Private and Public Cyber
              Expectations Need to Be Consistently Addressed. GAO-10-628.
              Washington, D.C.: July 15, 2010.

              Cyberspace: United States Faces Challenges in Addressing Global
              Cybersecurity and Governance. GAO-10-606. Washington, D.C.: July 2,

              Cybersecurity: Continued Attention Is Needed to Protect Federal
              Information Systems from Evolving Threats. GAO-10-834T. Washington,
              D.C.: June 16, 2010.

              Intellectual Property: Observations on Efforts to Quantify the Economic
              Effects of Counterfeit and Pirated Goods. GAO-10-423. Washington,
              D.C.: April 12, 2010.

              Cybersecurity: Progress Made but Challenges Remain in Defining and
              Coordinating the Comprehensive National Initiative. GAO-10-338.
              Washington, D.C.: March 5, 2010.

              Page 15                                           GAO-12-876T Cyber Espionage
           Appendix II: Related GAO Products

           Intellectual Property: Enhancements to Coordinating U.S. Enforcement
           Efforts. GAO-10-219T. Washington, D.C.: December 9, 2009.

           National Cybersecurity Strategy: Key Improvements Are Needed to
           Strengthen the Nation’s Posture. GAO-09-432T. Washington, D.C.:
           March 10, 2009.

           Intellectual Property: Federal Enforcement Has Generally Increased, but
           Assessing Performance Could Strengthen Law Enforcement Efforts.
           GAO-08-157. Washington, D.C.: March 11, 2008.

           Cybercrime: Public and Private Entities Face Challenges in Addressing
           Cyber Threats. GAO-07-705. Washington, D.C.: June 22, 2007.

           Intellectual Property: Strategy for Targeting Organized Piracy (STOP)
           Requires Changes for Long-term Success. GAO-07-74. Washington,
           D.C.: November. 8, 2006.

           Page 16                                         GAO-12-876T Cyber Espionage
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