When people think about the security of their organizations, oftentimes their thoughts are geared towards mitigating external threats and rightfully so. After all, if there were no access control or intrusion detection measures in place, there would be nothing to stop malicious actors who wanted to do the company harm. Or if there were no surveillance cameras in place, people would have little to work with in trying to identify the perpetrator of a crime. Oftentimes, however, the most damaging events are those that involve no forced entry or any other visible signs that a crime has taken place. That is exactly what is happening today in many organizations across the U.S. in the form of trade secret theft.
According to a study published last year by the Center for Responsible Enterprise and Trade and PricewaterhouseCoopers, it was estimated that trade secret theft cost the U.S. and other advanced economies between 1 percent and 3 percent of their GDP on average each year. These thefts also run the gamut in terms of the industries targeted including; defense and military weaponry; chemical development and manufacturing; communications technology; and pharmaceuticals just to name a few.
Last week, authorities indicted seven people in separate incidents related to the theft of intellectual property from U.S.-based companies. In one case, six Chinese nationals were charged with conspiring to steal wireless technology from Skyworks Solutions Inc. and Avago Technologies. One of the suspects was taken into custody when he arrived from China at Los Angeles International Airport. The other five are believed to be in China. In the other case, a prominent physics professor at Temple University stands accused of fraudulently obtaining semiconductor technology to share with China in exchange for prestigious appointments in the country.
While various nation states have been linked to different economic espionage cases through the years, perhaps the most egregious offender is China. In a report submitted to Congress in 2012, the U.S.-China Economic and Security Review Commission concluded that China was dependent upon trade secret theft for innovation. “China depends on industrial espionage, forced technology transfers, and piracy and counterfeiting of foreign technology as part of a system of ‘innovation mercantilism.’ China can avoid the expense and difficulty of basic research and unique product development by obtaining what it needs illegally,” the report stated.
“It’s an ongoing and relentless attempt by the People’s Republic of China to steal America’s industrial foundation right out from under us,” said Brett Kingstone, author of the book, “The Real War Against America.” “They do this in the private sector and they do it also in the government sector - pillaging our military defense contracting technology and stealing our industrial know-how - which robs Americans of their ability to compete and make a living and it is actually wiping out the American middle class because it is destroying manufacturing jobs.”
Kingstone can personally attest to the damage that intellectual property theft can have on a company. As a 19-year-old student at Stanford University, Kingstone founded Super Vision International, a manufacturer of fiber optic systems and components. The company would eventually see its sales crippled by Chinese counterfeiters, at which point Kingstone embarked on a lengthy legal battle to bring the perpetrators to justice. Kingstone’s company was eventually awarded a $42 million verdict from a Florida court against nearly a dozen companies based in Hong Kong, Shanghai and Panama.
Kingstone believes the incidents of trade secret theft brought before the media’s attention only really scratch the surface when it comes to how prevalent these cases really are in U.S. businesses today.
“What I would like to see is basically more reports of these offenders being brought to justice. I would like to see it every day, not a couple of arrests every six months or every year or so,” he added. “We are literally having our country stolen out from under us by the PRC. They are stealing the lifeblood of our society, which is our intellectual property.”
While he said he knows there are people within the FBI and other federal law enforcement agencies that want to pursue more cases against suspected intellectual property thieves, Kingstone said their efforts are hampered by those within the government who are reluctant to press the issue.
“I think we have got an army of incompetence in Congress, particularly in the executive offices – people who either are a) completely incompetent or b) are so terrified of pissing off the Chinese because they own so much of our debt that they allow this robbery to continue without any real plan to stop it,” he said. “Unfortunately, our country has mortgaged our sovereignty. We’ve got overeducated people in our State Department who are pontificating about what the impact is going to be on the country if we alienate the Chinese who own so much of our debt. I know personally many very dedicated individuals in the FBI who are just chomping at the bit to get the opportunity to arrest more of these offenders and routinely they are being told to stand down.”
Because they know they can’t rely on the government for much help, Kingstone said that private industry has done a better job in recent years of implementing better firewalls, as well as other measures as part of an effort to better protect their intellectual property. Unfortunately, Kingstone said that the lure of cheap products will continue to drive demand for counterfeit goods for the foreseeable future.
“Too often I think people are misled because they can save a couple of bucks on a Chinese product. They’ll buy it and, ultimately, they find out it is defective and it is usually way after the product has already caused the damage, either to someone individually or, in the case of a building product, the health of the building and it has to be ripped out at a much higher price than if they had bought it from a legitimate producer,” said Kingstone. “This is what has allowed China to continue their piracy for decades.”
