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A New Idea for Fighting Chinese Theft of American Defense Technology

Kevin CarrollSmartFlow Summit Speaker Highlight #1

The following excerpt is from a recent article in War on the Rocks, a platform for analysis, commentary, debate and multimedia content on foreign policy and national security issues. The author, Kevin Carroll, is a partner in Wiggin and Dana’s litigation department and before joining the firm reported to the White House Chief of Staff and Secretary of Homeland Security, the Hon. John F. Kelly, as executive director and chief counsel of the U.S. Council on Transnational Organized Crime.

Kevin presented at the SmartFlow Software Anti-Piracy and License Compliance Summit in 2017, where he spoke about what the government is doing to enforce federal law with respect to transnational criminal organizations and proposed legal amendments to thwart cybercrime and intellectual property (IP) theft.

The complete original article published in War on the Rocks is available at https://warontherocks.com/2019/07/a-new-idea-for-fighting-chinese-theft-of-american-defense-technology/.

Chinese Theft of American IP

China is engaged in an organized effort to mass produce counterfeit goods for resale abroad. This counterfeiting and copyright and trademark infringement harms America’s business owners, consumers, inventors, investors, and workers. China’s campaign of theft simultaneously seeks to obtain U.S. military technology to gain a decisive material advantage in a future armed conflict. To fight back, the U.S. government should allow American plaintiffs suffering intellectual property misappropriation and infringement by foreigners to file suit in the legal jurisdiction of Washington, D.C. if the copyrights, trade secrets, or patents in question are subject to defense export controls.

Trade talks between Beijing and Washington are at an impasse, and the related issue of Chinese theft of American intellectual property remains unresolved, with the United States requesting hundreds of changes to Chinese law on this topic, according to China. What if President Xi Jinping and President Donald Trump ultimately cannot reach agreement on this issue?

As diplomats negotiate, the theft of intellectual property continues. The 2015 agreement between President Barack Obama and President Xi regarding economic cyberespionage against commercial targets appears to have reduced theft somewhat, but a senior U.S. intelligence official stated in 2018 that China continues to violate aspects of the accord.

While many countries engage in cyberespionage for commercial purposes, including U.S. allies, America’s defense industrial base is a primary target of China’s campaign of theft, which presents a special danger. A dramatic U.S. Navy report earlier this year asserted that China derives from cyberespionage “an incalculable near- and long-term military advantage… altering the calculus of global power.” Businesses and universities that work with the Navy are under attack, as well. A senior official described the Navy as “under siege. People think it’s much like a deathly virus — if we don’t do anything, we could die.” An executive of cybersecurity firm FireEye aptly described this Chinese hacking as “preparation for great power conflict.”

IP Issues and Trade Negotiations

Despite the significant national security impact of intellectual property theft and cyberespionage, federal penalties for these crimes are minimal compared to those for other serious crimes, such as narcotics trafficking or terrorism. Copyright infringement, computer fraud, and trade secret theft carry maximum sentences of one to ten years, whereas drug and terror crimes routinely and appropriately result in decades-long sentences.

U.S. laws have not kept up with the pace of technology or with adversaries’ use of intellectual property theft as an instrument of national strategy. For example, neither computer fraud nor the violation of digital copyrights can form the basis of a prosecution under the Racketeer Influenced and Corrupt Organizations (RICO) statute, and the law authorizing wiretaps in criminal investigations does not provide for warrants to discover evidence of intellectual property theft.

Fixing these intellectual property issues in current trade negotiations may prove out of reach. A comprehensive trade deal encompassing both the issue of intellectual property theft and the $419 billion annual trade imbalance will be difficult to reach. The United States may lack sufficient leverage to exert its will on China for reasons of neglect decades in the making.

Economically, politically, and militarily, America’s strength vis-a-vis China is at a low ebb. As a result of the power imbalance and the complexity of the deal, a broad economic agreement encompassing both trade and intellectual property may be impossible to reach. But that does not mean that the United States must fail to address the issue of intellectual property theft: It can and should act unilaterally to do so.  Read the entire article>>

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Elisabeth Glover
Marketing Communications
SmartFlow Compliance Solutions
e.glover@smartflowcompliance.com

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