Terror Tactics: Report Urges Government to Use Financial, Trade and Immigration Systems to Squeeze Theft of IP

A new report on halting the theft of trade secrets and other intellectual property reads like a blueprint for fighting terrorism­—not surprising, given that it was co-authored by the nation’s former spy chief and a member of the 9/11 Commission.

On Wednesday, the Commission on the Theft of American Intellectual Property released its report detailing the scale and scope of the problem.  The Commission is an independent, bipartisan body made up of members from national security, foreign affairs, academia, politics and the private sector.  It is chaired by former director of national intelligence Dennis C. Blair and former U.S. Ambassador to China and ex-Utah Gov. Jon M. Huntsman Jr.  Its report is the product of an eleven-month study. 

The Commission’s report pulls no punches: it calls IP theft “one of the most pressing issues of economic and national security facing [the United States]” and singles out China as “the biggest IP offender in the world.”  Along with documenting patent, trademark, and copyright violations, the report dedicates a full chapter to trade secret theft.  Among its alarming findings:

  • In 2009, U.S. firms lost at least $1.1 billion from the misappropriation of trade secrets to China alone.  Russia is also an aggressive collector of sensitive U.S. economic information and technologies, especially in cyberspace.
  • In the past two years, an unprecedented number of cyberattacks have been perpetrated against major corporations, nonprofit institutions, and governments, with the majority of these attacks originating in China.  Our blog discussed the real lesson of Chinese cyberhacking earlier this month.
  • Cyberattacks are common, with some companies experiencing 72 successful attacks per week.  All sectors and all types of companies, large and small, are the targets of attacks.

Just as the 9/11 Commission reported the intelligence failings that led to the terrorist attacks,
the new report contends that recent U.S. responses lack “teeth” and are ineffective at protecting American IP.  Administration officials tend to decry foreign theft of American IP and only promise to get tough, the report says.  And while the U.S. government has increased its enforcement and prosecution initiatives, products in today’s economy tend to have short life cycles and, even in the best judicial systems, legal remedies are too slow to meet the needs of companies whose innovations have a short product life.  Even the White House’s recent release of its “Administration Strategy on Mitigating the Theft of U.S. Trade Secrets” in February 2013 suffers from an important shortcoming, according to the Commission: it focuses almost exclusively on preventing theft from the perspective of the potential victim, but offers little insight as to how to combat the underlying problem.

Thus, the Commission’s paramount goal is to make IP theft unprofitable.  Some of the Commission’s most notable recommendations echo those of the 9/11 Commission in their proposed use of banking, trade, immigration and criminal systems. They include:

  • Implementing a speedier process to impound imports suspected of containing or benefitting from stolen IP based on probable cause;
  • Empowering the Secretary of the Treasury to deny use of American bank accounts to foreign companies that repeatedly use or benefit from the theft of American IP;
  • Requiring the Securities and Exchange Commission to judge whether a company’s use of stolen IP is a material condition that should be publicly reported (further forcing corporate leaders to take IP protection seriously);
  • Expanding the number of green cards available to foreign students who earn scientific or technological degrees in American universities and who have a job offer at graduation, thus giving them the opportunity to contribute to American innovation instead of forcing them to return home and work for competing companies;
  • Amending the Economic Espionage Act of 1996 to provide a federal private right of action for trade secret theft; and
  • Pressing China and other countries towards becoming self-innovating economies.

Would these measures be effective?  First, Congress would need to act.  It took Congress three years after the 9/11 attacks to pass the Intelligence Reform and Terrorism Prevention and Act of 2004, which embraced many of the 9/11 Commission’s findings.  (One of the provisions of that bill created a director of national intelligence to coordinate the nation’s intelligence bureaucracy.  Blair was the third person to serve in the role.  Slade Gordon, a former U.S. senator from Washington and a member of the 9/11 Commission, also served on the IP panel.)

>The Commission’s complete report, and its full roster of members, can be found here.  An editorial on the topic written by Blair and Huntsman can be found here.