Mandiant, a U.S.-based cyber-security firm released (February 19, 2013) an evidentiary report…linking a specific unit of the (Chinese) People’s Liberation Army (PLA) in Shanghai…
- to a global cyber espionage campaign against companies in twenty economic sectors.
The cyber (economic) espionage campaign, Mandiant reported…is designed to access, misappropriate – infringe valuable intellectual property, i.e., patents, trademarks, copyrights, etc., and other forms of intangible assets, i.e., intellectual, structural, and relationship capital.
The Mandiant report is relevant because, among other reasons, it recognizes the indisputable – irreversible economic fact that steadily rising percentages, i.e.,
- 80+% of most company’s value, sources of revenue, competitiveness, and sustainability lie in – directly emerge directly from intangible assets!
Not unexpectedly, Mandiant’s report received substantial media coverage, prompted no doubt, in part, by its immediate and categorical rejection – opposition by Chinese government officials, and
- the following day (February 20, 2013) the Obama administration released a newly tweaked strategy intended to combat theft of intellectual property and other intangible assets registered – belonging to U.S. companies
- based on the argument that trade secret theft threatens U.S. national (economic) security.
The Obama administrations strategy to combat IP theft (misappropriation, infringement) focused on five strategic actions, i.e.,
- focus diplomatic efforts to protect trade secrets overseas.
- promote voluntary best practices by private industry to protect trade secrets.
- enhance domestic law enforcement operations, presumably to thwart and investigate economic espionage, i.e., Economic Espionage Act, 1996.
- improve domestic legislation regarding economic espionage, and
- elevate public awareness encourage stakeholder outreach to the jurisdictional federal agencies, i.e., the FBI primarily.
Economic espionage, again being referred to as equating with (U.S.) national security is a previously crossed chasm that warrants periodic reminders…because, in most instances, the criminal act of economic espionage are collaborations of foreign government, ala state sponsored initiatives to…
- clandestinely acquire information assets-capital from another (foreign) government or private sector entity that are in a safeguarded – protected states. That is, the information assets and intellectual capital, are…
- owned – held – registered to a private sector entity.
- distinguished as proprietary.
- likely to meet the six requisites of trade secrecy.
- enforced by conventional (largely westernized) intellectual property law, or,
- categorized as being classified by a government entity.
Frequently economic espionage is merely referred to as corporate or industrial espionage in a dismissive tone.
Fortunately, the U.S., and other key countries are now…more inclined to equate or elevate the aggressive nature, increasingly sophisticated, persistent, and predatorial (asset) targeting capabilities associated with 21st century economic espionage to national and economic security status!
To my knowledge, this context was initially expressed by…former FBI Director William Sessions, in the mid-1990’s, during his address to the then, Cleveland Economics Club.
In more recent contexts, numerous U.S. private sector and government leaders point to economic (cyber) espionage as metastasizing to…the point of being a (the) primary contributor to the…
- “greatest transfer of wealth in history’.
While this characterization may have originated with the intent to dramatize the significance of this adverse phenomena, it’s hardly arguable.
I suspect, but have no specific evidence, beyond the anecdotal...to suggest there is an agenda in play, correctly or not, to modify the context of economic espionage, away from its 1996 roots, ala passage of the Economic Espionage Act, insofar as differentiating (a.) cyber-espionage with the more conventional (HUMINT) (b.) economic espionage.
To be sure, well before the advent of sophisticated cyber technologies now applied as enablers – facilitators of economic espionage, were comparably stealthy and effective ‘human intelligence’ tradecraft…
- the unsettling difference, in my view, being, holders-protectors and economic – competitive advantage adversaries became more inclined to accept the view that all valuable intellectual – structural assets exist in electronic ‘bits and bytes’.
However, be assured, insofar as global state-sponsored and independent operators who routinely engaged in economic espionage…they did not wholly overlook or dismiss the extraordinary value embedded in – held by humans, as intellectual, structural, and relationship capital.
International law and economic (cyber) espionage…countries’ desire and need to have larger array of consistently potent legal prosecutions and other countermeasures to combat economic (cyber) espionage are challenged somewhat by existing international law on espionage, says David P. Fidler, Professor of Law at the Indiana University and a Fellow at I.U.s Center for Applied Cyber-security Research and member of the American Society of International Law.
In his fine article titled ‘Economic Cyber Espionage and International Law: Controversies Involving Government Acquisition of Trade Secrets through Cyber Technologies’ (ASIL, March 20, 2013, Volume 17, Issue 10), Professor Fidler points out that…
- while a victim country, and presumably private sector companies – businesses as well, could assert that spying (as prelude to – for purposes of economic espionage)
- violates the principles of sovereignty and non-intervention,
- numerous countries probably, and unfortunately in my view, have accepted state-sponsored activities engaged in by economic – competitive advantage adversaries, have variously capitulated, to the extent that such appeals may not be regarded as serious or sufficient claims, standing alone.
Although cyber espionage is sometimes described as “cyber attacks” and “cyber-war,” Fidler identifies no government that regards efforts to thwart cyber espionage as constituting a prohibited use of force.
Other bodies of international law under which espionage issues arise, e.g., rules regarding armed conflict with respect to diplomatic relations – actions in tenuous periods, absent a declaration of war, do not sufficiently prohibit or necessarily constrain espionage, or economic espionage in particular.
- still. most countries prohibit economic espionage under (their own) national law.
- however, enforcement of such laws present challenges, on various levels, usually because the specific elements of economic espionage include foreign government participation.
- but, reliance on extradition or mutual legal assistance treaties is largely ineffective, especially says Fidler, when a state is accused of sponsoring criminal acts, i.e., economic espionage.
Is there a possible role for TRIPS…i.e., the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) wherein the World Trade Organization (WTO) requires each member country to protect, within its territorial boundaries, certain types of (conventional, usually westernized) intellectual property rights, including trade secrets.
Some have argued that the U.S. should use protections enunciated in international trade law to…further safeguard intellectual property against state-sponsored economic (and, cyber) espionage. As readers of this blog already know, private sector enterprises engaged in trade and investment agreements and/or transactions have used international law to safeguard their intellectual property rights.
However, WTO member countries have, to date, shown little interest… according to Professor Fidler, in addressing economic espionage within the constructs of WTO, despite mounting concerns and rising losses.
- one reason is that WTO member countries have seldom – not used WTO-based strategies.
- the reason, Fidler suggests, lies in the difficulty of successfully formulating a claim that economic espionage actually violates WTO agreements.
WTO rules impose certain obligations on member countries to fulfill within their territorial boundaries…that is, WTO members that engage in economic espionage, i.e., covertly (illegally) obtaining intellectual property and other forms of intangible assets belonging to – held by other WTO member countries which operate companies within the alleged offending countries’ territorial boundaries, could be in violation of those WTO obligations. No prudent business leader should exhibit naiveté about such obligations!
Even if a WTO member countries could construct what could become a successful claim that economic (cyber) espionage violates a WTO rule…it would have to establish that another WTO member’s government is responsible for the act.
Usually, Professor Fidler notes, establishing state-sponsored responsibility (co-conspiracy) for the challenged acts…is not difficult, but WTO cases have generally not involved accusations regarding state-sponsored economic (cyber) espionage.
It is not clear, Fidler suggests, whether a WTO member country – government could successfully satisfy such a burden…by relying solely on evidence provided by a private sector victim, e.g., Mandiant’s report, without revealing specific counter-intelligence tradecraft that may have been in place.
Far too much time, in my view, is focused on identifying – naming the culprits and their sponsors…with far too little attention and resources from private sector companies on designing, incorporating, and executing effective strategies to combat it.
Let’s say, for instance, we accept Mandiant’s report in full…along with the annual report by the Office of the National Counterintelligence Executive, and various other reports citing China – Russia as the most aggressive economic (cyber) espionage adversaries, to the exclusion – neglect of other players.
I sense most readers of this blog are pragmatists…that is to say, we would be very surprised to learn of a company that would elect to cease operations and/or business transactions in a country with 1.2 billion+ potential consumers ala China, because some of their intellectual property went missing. I just don’t see that happening!
While I and my professional colleagues, would be hard pressed to…identify any company leader who is wholly unfamiliar with or agrees with this status quo. Instead, they choose to accept ‘it is what it is’ and the extremes of globally predatorial, aggressive, and winner-take-all business transactions have, unfortunately, variously become the norm!
(A special thanks to David P. Fidler, Professor of Law at the Indiana University and a Fellow at I.U.s Center for Applied Cyber-security Research and member of the American Society of International Law for his fine article titled ‘Economic Cyber Espionage and International Law: Controversies Involving Government Acquisition of Trade Secrets through Cyber Technologies’ (ASIL, March 20, 2013, Volume 17, Issue 10) that inspired this post.)
Michael D. Moberly [email protected] St. Louis (originally posted) March 11, 2014 the ‘Business Intangible Asset Blog’ since May 2006, 650+ posts, ‘where intangible assets, business, and effective solutions converge’.
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