US Seeks to Tackle Trade Secret Theft by China, Others

By Doug Palmer 21 February 2013

WASHINGTON — Faced with what experts say is growing theft of US trade secrets by China and other nations, the White House on Wednesday vowed to protect American businesses and economic security more aggressively and consider tougher laws at home.

The White House did not directly cite China, which many see as the main threat and did not propose new penalties on perpetrators. A study released this week by a private security firm accused the Chinese military of orchestrating numerous cyber attacks against US businesses, a charge Beijing has denied.

The Obama administration said its strategy aims to counter what US Attorney General Eric Holder called “a significant and steadily increasing threat to America’s economy and national security interests.”

“As new technology has torn down traditional barriers to international business and global commerce, they also make it easier for criminals to steal secrets and to do so from anywhere, anywhere in the world,” Holder said at a White House event to unveil the strategy.

He said the perpetrators include “individuals, companies and even countries that are eager to tilt the playing field to their advantage.”

The plan includes working with like-minded governments to put pressure on bad actors, using trade policy tools where possible, increasing criminal prosecutions and launching a 120-day review to see whether new legislation is needed.

While the report did not specifically name any country as the main culprit, it listed 17 cases of trade secret theft by Chinese companies or individuals since 2010, far more than any other country mentioned in the report.

“We have repeatedly raised our concerns about trade secret theft by any means at the highest levels with senior Chinese officials and we will continue to do so,” Under Secretary of State Robert Hormats said.

Those cases cited mostly involved employees stealing trade secrets on the job rather than cyber attacks. US corporate victims of the theft included General Motors, Ford, DuPont, Dow Chemical, Motorola, Boeing and Cargill.

Last week, Representative Dutch Ruppersberger, the top Democrat on the House of Representatives Intelligence Committee, said US companies suffered estimated losses in 2012 of more than $300 billion due to trade secret theft, a large share due to Chinese cyber espionage.

Cybersecurity and intelligence experts welcomed the White House plan as a first step, but some said much more needed to be done.

“You’ve got a nation state taking on private corporations,” said former CIA director Michael Hayden. “That’s kind of unprecedented … We have not approached resolution with this at all,” he said.

The US Chamber of Commerce, the nation’s largest business lobby, offered a lukewarm statement of support, while other industry groups expressed more enthusiasm for the effort.

“We strongly endorse and applaud the administration’s focus on curbing theft of trade secrets, which poses a serious and growing threat to the software industry around the world,” said Business Software Alliance President and CEO Robert Holleyman.

Victoria Espinel, the White House intellectual property rights enforcement coordinator, said the new strategy improves existing government efforts to protect the innovation that drives the US economy and job creation.

The report that laid out the strategy repeated a 2011 White House recommendation that the maximum sentence for economic espionage be increased to at least 20 years, from 15 currently.

Another part of the solution is promoting a set of “best practices” that companies can use to protect themselves against cyber attacks and other espionage, Espinel said.

The report also said the US Federal Bureau of Investigation was “expanding its efforts to fight computer intrusions that involve the theft of trade secrets by individual, corporate and nation-state cyber hackers.”

In an interview, US Trade Representative Ron Kirk said the problem of trade secret theft in China was a factor in the decisions of some US companies to move operations back to the United States.

The companies have “had very frank conversations with the Chinese, [saying] ‘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,’” Kirk told Reuters.