Obama Order Hailed As Bold Move Against Cyberthreats From Overseas

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By Alexei Alexis

April 1 — A new executive order from President Barack Obama is being hailed as a potentially powerful tool against cyberthreats from overseas, such as efforts to steal valuable trade secrets from U.S. companies.

The order, unveiled on April 1, authorizes the Treasury Department to impose sanctions on foreign individuals or entities that engage in malicious cyber-related activities that pose a significant threat to national security or the economy.

“Economic sanctions may be especially helpful in responding to systemic theft of intellectual property,” Michael Chertoff, a former Department of Homeland Security chief, told Bloomberg BNA. “But they need to be used carefully so as not to trigger a trade war.”

Others called for the order to be vigorously enforced.

“The proof, as they say, will be in the pudding—are these just words on paper or part of a real enforcement effort? Only time will tell, but this is a good first step,” Paul Rosenzweig, founder of Red Branch Law and Consulting PLLC in Washington and a former deputy assistant secretary for policy at DHS, said in a blog post.

Norma Krayem, global co-chair of data protection and cybersecurity at Squire Patton Boggs LLP, said the order is significant in that it makes clear that any nation-state that attacks U.S. companies is now officially taking on the U.S. government.

Frank Keating, president and CEO of the American Bankers Association, said the order “sends a strong signal to cybercriminals and foreign entities that America is committed to fighting this increasing threat.”

Sanctions for Trade Secrets Theft 

Under the order, the secretary of the treasury, in consultation with the attorney general and the secretary of state, could impose sanctions on individuals or entities that knowingly receive or use trade secrets that were stolen by cyber-enabled means for commercial or competitive advantage or private financial gain, the White House said.

The order specifies that sanctions would apply when the underlying theft of the trade secrets is reasonably likely to result in, or has materially contributed to, a significant threat to the national security, foreign policy or economic health or financial stability of the U.S.; for example, where a corporation knowingly profits from stolen trade secrets.

“Cyber threats pose one of the most serious economic and national security challenges to the United States, and my administration is pursuing a comprehensive strategy to confront them,” Obama said in a statement.

Cybersecurity has become a top focus in Washington amid growing threats. In December, the FBI confirmed that a major attack on the computer networks of Sony Pictures Entertainment was linked to North Korea. The attack occurred as the company prepared for the release of a film titled the “The Interview,” a comedy that involves a fictional effort by the CIA to have North Korean leader Kim Jong Un assassinated.

In May 2014, the U.S. charged five Chinese military officials with cyber-related economic espionage targeting American nuclear power, metal and solar companies.

Cybersecurity ‘Gap' Filled 

White House Cybersecurity Coordinator Michael Daniel told reporters April 1 that the president's new order is designed to fill a gap in the government's effort to deal with malicious cyber-related activities carried out by individuals located in places that are difficult for U.S. diplomatic and law enforcement tools to reach. In some cases, he said, it is because the individuals are behind the borders of a country that has weak cybersecurity laws, or their government is complicit in, or turning a blind eye to, the activity at issue.

“What we are doing is putting in place a tool that will enable us to impose costs on those actors,” Daniel said in a press call.

He stressed that the order is intended to be used in a “targeted and judicious“ way. “We will not certainly be using this to target free speech, or interfering with the free and Open Internet, and we’re not going to be going after the innocent victims of people whose computers were taken over and used by malicious actors,” he said.

Alan Charles Raul, a partner at Sidley Austin LLP in Washington, said the president's order might serve as an effective deterrence tool if vigorously implemented.

“The administration should be applauded for adopting this more proactive approach to defending U.S. economic cyberinterests and for signaling a move away from the counter-productive ‘blame the corporate victim' enforcement mentality that has prevailed too long,” Raul told Bloomberg BNA. “The next important step the administration should consider would be to hold countries accountable under U.S. and international trade rules for their state-sponsored or state-condoned cybercrime.

To contact the reporter on this story: Alexei Alexis in Washington at aalexis @bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

The executive order can be found at: https://www.whitehouse.gov/the-press-office/2015/04/01/executive-order-blocking-property-certain-persons-engaging-significant-m.

A fact sheet is available at: https://www.whitehouse.gov/the-press-office/2015/04/01/fact-sheet-executive-order-blocking-property-certain-persons-engaging-si.