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Chinese Military Hackers Indicted for Economic Espionage Involving AD/CV Cases

Friday, May 23, 2014
Sandler, Travis & Rosenberg Trade Report

The Department of Justice announced May 19 that a grand jury has indicted five members of the Chinese military for computer hacking, economic espionage and other offenses directed at six U.S. entities, including companies in the nuclear power, metals and solar products industries. Attorney General Eric Holder said this case “represents the first ever charges against known state actors for infiltrating U.S. commercial targets by cyber means.”

The indictment alleges that over an eight-year period the defendants conspired to hack into U.S. entities, to maintain unauthorized access to their computers and to steal information from them that would be useful to their competitors in China, including state-owned enterprises. In some cases, the conspirators allegedly stole trade secrets that would have been particularly beneficial to Chinese companies at the time they were stolen. In other cases, the conspirators allegedly stole sensitive internal communications that would provide a competitor, or an adversary in litigation, with insight into the strategy and vulnerabilities of the U.S. entity. “In sum,” Holder said, “the alleged hacking appears to have been conducted for no reason other than to advantage state-owned companies and other interests in China, at the expense of businesses here in the United States.”

Three of the six U.S. entities named in the indictment as having been hacked were involved in litigation against imports from China (including antidumping and/or countervailing duty cases), while another was actively protesting Chinese trade policies. This suggests that the hacking may have been retaliatory, a New York Times article speculated, which “could discourage further trade policy challenges.” One of the other two entities was pushing back against demands that it share proprietary technology, the article states, while the other was working to acquire a Chinese company in a sensitive industry.

Beijing called the charges “purely ungrounded and absurd” and responded by canceling a meeting of a bilateral cybersecurity working group. “The Chinese government, the Chinese military and their relevant personnel have never engaged or participated in cyber theft of trade secrets,” said Chinese embassy spokesman Geng Shuang, and the indictment “jeopardizes China-U.S. cooperation and mutual trust.” Geng added that “it is a fact known to all” that the U.S. conducts its own “cyber theft, wiretapping and surveillance activities … against Chinese government departments, institutions, companies, universities and individuals.”

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