Industry Market Trends
U.S. Steps Up Efforts to Fight Trade-Secret Theft
March 7, 2013
The White House has unveiled a new strategy to help combat foreign theft of American business trade secrets without mentioning specifically which country it's targeting, though most observers believe the measures are focused on China. A new strategy document recently released by the White House outlines the administration's efforts to curb trade-secret theft and provides examples of the sort of high-profile trade-secret cases on which they'll focus. Yu Xiang Dong, a former Ford Motor Company employee who resigned to work at the Beijing Automotive Company, was sentenced to 70 months in federal prison for copying 4,000 Ford documents onto an external hard drive, which he took to China. Ford valued the loss of this information at $50 million dollars. Hong Meng, a research chemist for DuPont, was sentenced to 14 months in federal prison for stealing $400 million worth of trade secrets from DuPont's research into breakthrough proprietary chemical processes for OLED displays and passing the secrets to a Chinese university. Shanshan Du, a former General Motors engineer, and her husband, Yu Qin, were found guilty in Detroit by a federal jury of stealing GM trade secrets related to hybrid vehicle technology worth $40 million. They tried to pass the trade secrets to a Chinese automaker. "We will continue to act vigorously to combat the theft of U.S. trade secrets that could be used by foreign companies or foreign governments to gain an unfair economic edge," the White House explained. An administration official claimed that the initiative "is not focused on any one country, nor is it focused on cybersecurity exclusively, though cyber does play an important role in the strategy," according to Agence France-Presse. However, most experts believe the new measure is primarily directed toward China. U.S. companies lost an estimated $300 billion in 2012 through trade-secret theft by overseas interests, with a large share derived from Chinese cyber espionage, but some industry observers were disappointed that the White House offered relatively little in the way of concrete proposals to stop the tide of theft. The U.S. "will step up diplomatic pressure and study whether tougher laws are needed to stop a wave of trade-secret theft," Reuters reports, but the White House document "offered few new ideas for dealing with the threat." The fact that the administration is publicizing the issue is itself a sign of progress. "Finally the White House has come into the open in its calls against other nations' stealing of trade secrets. Treating this as an international trade issue to be coordinated with our allies and other like-minded nations is a particularly good idea," Jason Healey, director of the Atlantic Council's Cyber Statecraft Initiative, told the Washington Post. But Healey also noted the paucity of new ideas or approaches for dealing with what the government correctly identifies as an important issue-the White House document uses the word "continue" more than 20 times, as in "We'll continue doing what we're doing." Shortly before the document was released, Internet-security firm Mandiant publicly accused a Chinese military cyberspy unit of targeting U.S. and other foreign firms and organizations with hacking attacks and stealing trade secrets. Chinese officials have denied Mandiant's claims. Naturally the problem isn't limited to China, and the number of corporate espionage victims is increasing around the world. Several weeks ago, Ulrich Birkenheier, the head of Germany's military counter-intelligence service told CNBC that "espionage against international defense projects" is "a growing challenge," with many foreign agents trying to obtain information about military trials of new defense products. Birkenheier identifed Russian and Chinese secret services as key culprits in efforts to recruit German soldiers to carry out industrial espionage. "We have to investigate that and prevent it," Birkenheier added. While Russian, Iranian, and Indian perpetrators have been caught stealing or trying to steal U.S. industrial trade secrets, Chinese nationals top the list of offenders. In mid-February, the Obama administration compiled a confidential list of computer addresses linked to a hacking group that has stolen terabytes of data from American corporations. According to the New York Times, nearly every one was traced back to "the neighborhood in Shanghai that is headquarters to the Chinese military's cybercommand." Despite criticism that Washington is not doing enough to protect U.S. industrial secrets, administration officials appear unwilling to single out specific countries and, until now, very few enforcement initiatives have been issued. Some lawmakers have started publicly calling out China for its hacking practices, but for now the administration is content to take a low-key approach to the issue. According to the Times, this reluctance is largely due to the fact that China-U.S. trade was worth $425 billion in goods last year, and China remains one of the largest holders of U.S. debt. "[A]s Hillary Rodham Clinton remarked to the Australian prime minister in 2009 on her way to visit China for the first time as Secretary of State, 'How do you deal toughly with your banker?'"