White House Shares Plan to Mitigate Trade Secret Theft

Copyright 2012 – Renee C. Quinn. Taken April 10, 2012.

Not long after it was reported that a Chinese military unit might be responsible for a number of cyber attacks that have taken place on US infrastructure and businesses, the Obama Administration unveiled its strategy to put an end to the theft of US trade secrets by foreign governments and foreign competitors.  More specifically, US Intellectual Property Enforcement Coordinator, Victoria Espinel, who spoke during a recent White House meeting, said that “the Administration will continue to act vigorously to combat the theft of American trade secrets that could be used by foreign companies or foreign governments to gain an unfair commercial advantage over U.S. companies.”

A Five-Step Approach

There were five action items discussed in the strategy document.  The first one suggests that more focus should be placed on diplomatic efforts to protect overseas trade secrets.  The second item calls for private industry to promote voluntary best practices in order to protect trade secrets.  The third action item suggests that domestic law enforcement operations should be enhanced.  The fourth item calls for the improvement of domestic legislation.  And the final action item seeks to provide more public awareness, as well as stakeholder outreach.

With respect to focusing diplomatic efforts on protecting trade secrets overseas, Ms. Espinel noted during the meeting that the Administration will boost diplomatic involvement by sharing its concerns with other countries that have a high occurrence of trade secret theft and building coalitions with those countries that share the same concerns.  There will also be a request made of foreign law enforcement officials to be more active when it comes to their treatment of trade secret theft, and the Administration will utilize its trade policy tools in an effort to give other governments that necessary nudge to act against the theft of trade secrets so that unfair competition against US businesses can be reduced.

Regarding the private industry’s promotion of voluntary best practices, Ms. Espinel stated that the Administration will work to support and facilitate industry-led efforts to create and develop such practices to guard against trade secret theft, and it will encourage businesses to share their best practices with each other in an effort to mitigate such theft.  The strategy document notes that while it is true that all identified best practices may not be perfect for each and every company or organization, the Administration encourages all companies to study and review their internal operations to determine whether or not their efforts being used at present are mitigating the risks of trade secret theft.

Concerning the third action item (the enhancement of domestic law enforcement operations), Ms. Espinel commented that the Department of Justice has made the investigation and prosecution of trade secret theft by foreign competitors and governments a top concern.  According to the strategy document, DOJ and the FBI will continue to report on trade secret investigations and prosecutions, and the FBI will continue its outreach and education efforts with the private industry via various local, regional and national programs.  Ms. Espinel further noted that the intelligence community, in conjunction with the FBI, will give warnings and provide threat evaluations to private industry companies regarding information and technology that are typically the targets of theft.

Regarding item number four (improved domestic legislation), Ms. Espinel stated that even though President Obama recently endorsed two pieces of legislation that will provide for better enforcement against trade secret theft, additional efforts will have to be made to ensure that the laws are as effective as possible and that they demonstrate the gravity of these crimes, as well as the economic impact it has on its victims.  That said, regular reviews of the laws will be conducted in order to figure out if additional changes should be made to enhance enforcement.

And finally, with respect to increasing public awareness about how trade secret theft poses a huge risk to the US economy, the strategy document suggests that enlightening the general public and all other stakeholders can prove to be effective in the effort to mitigate trade secret theft.  The document further notes that the FBI will continue its public awareness efforts on bringing attention to trade secret theft; the US Patent and Trademark Office and International Trade Administration will use its current “road show trainings” to offer round-tables that will educate the private sector about the financial ramifications of corporate and state-sponsored trade secret theft (especially for small and medium-sized businesses); and the Department of Commerce will utilize existing resources, such as “www.stopfakes.gov” in order to share helpful information with the private sector.

What to Do About China

The strategy document made mention of several cases of prior incidents with China that involved the theft of trade secrets.  Under Secretary of State Robert Hormats, who has stressed that China is not the only country taking part in trade secret theft, has stated, “With respect to China, protection of intellectual property and trade secrets remains a serious and highly troubling issue.  That’s why cyber security and protection of IPR and trade secrets are among the main items that we have discussed with the Chinese over the years in our annual strategic dialogue that we hold with the Chinese.”

During the meeting to unveil the strategy, US Attorney General Eric Holder made particular note that, “A hacker in China can acquire source code from a software company in Virginia without leaving his or her desk.”

There’s no doubt that the Obama Administration sees China as a major threat, particularly since the strategy document makes mention of about 17 different cases that involved trade secret theft by Chinese companies or individuals since 2010– quite a bit more than any other country noted in the document.  In fact, a number of US companies have decided to move their operations back to the states because of it.  I think that US Trade Representative Ron Kirk said it best in an interview that he had with Reuters: “You know, it’s one thing to accept a certain level of copyright knock-offs, but if you’re going to take our core technology, then we’re better off being in our home country.”  Enough said.


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Join the Discussion

One comment so far.

  • [Avatar for Roland]
    March 12, 2013 10:16 am

    A big problem is actually detecting trade secret theft, as by definition a trade secret is not publicly known – unlike a patent etc. hence until the ‘owner’ of the trade secret contacts the authorities, the authorities have nothing to go on. Also as Gene has often pointed out there is no formal protection for trade secrets.

    Hence I I don’t really see how steps three and four will have any impact on trade secret theft by non-US based entities. Step one only seems to be of value if it is aimed at making it easier to prosecute offenders, but then the potential offences are unauthorised access and theft, bolstered by a load of spleen venting hyperbole as we have seen in several high profile extradition cases in recent years.

    So this seems like a nice political strategy to be seen to do something but deliver very little.

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