Theft of High Value Intangible Assets

Why do business management teams express surprise when they learn high value intangible assets have been stolen…it’s mid-October 2018 and the world is learning of another incident, presumably (Chinese) state-sponsored, wherein there was either an attempted or actual theft of IP (intellectual property) from a U.S. company.

Federal law enforcement officials state…in their 16-page indictment, that Mr. Xu tried to steal proprietary information about jet engine fan blade designs from a GE Aviation plant located in a northern suburb of Cincinnati, Ohio named Evendale. The ‘Evendale plant’ as it is widely referred throughout southeast Ohio, is known for, among other things, being one of the world’s top jet engine suppliers for commercial and military aircraft.  https://kpstrat.com/wp-admin/post.php?post=5235&action=edit&rp4wp_parent=11648

This case is important and may well be distinctive…compared to previous espionage – economic espionage incidents on multiple levels…

1. Mr. Xu is reported to be employed by the China’s Ministry of State Security, which, not insignificantly, is China’s primary spy agency.

2. as reported, Mr. Xu’s case may be tried in open (federal) court in the Southern District of Ohio (Cincinnati).

3. demonstrate China’s (and by extension, other economic – competitive advantage adversary’s) methods for acquiring U.S. company’s trade secrets and other forms of proprietary (classified) information.

4. embarrass Chinese government officials in terms of exposing their long-term strategies for misappropriating trade secrets a costly and shameful endeavor for China, as well as other global ‘players’.

5. demonstrate that the U.S. private sector and federal law enforcement have the capacity to identify and thwart both espionage and economic espionage by foreign entities coupled with the political will to prosecute same.

6. convey to economic – competitive advantage adversaries there is are numerous ‘global costs’ associated with engaging in – being prosecuted for espionage, i.e., money, reputation, image-stature, and goodwill, among others, which may become precedents for modifying – changing behaviors. https://kpstrat.com/wp-admin/post.php?post=154

Mr. Xu was actually-arrested in Belgium…no doubt, one reason is to demonstrate intent and mitigate the potential relevance of introducing ‘alternative facts’ to account for his actions. Xu was extradited to the U.S. to face charges of espionage. a current Chinese intelligence official who, its reported, will be prosecuted (tried) in an open U.S. court.

To be sure, this incident is not merely a ‘one off’…or otherwise, an isolated incident. The U.S. has long been an ‘information rich environment’ which attracts determined global cadres of state sponsored, as well as, independent ‘legacy free’ intelligence collectors who endeavor (maneuver) to be in sufficient-proximity to targeted/designated (corporate, academic, military) intellectual and structural capital.

An objective (premise) for countries to sponsor – engage in espionage activities…in this instance, and most others which I am familiar, is not, as they say, ‘rocket science’. It is to access, acquire, and disseminate valuable economic – competitive advantage information on behalf of, and to, receptive – designated end users.

In this instance, a product of Mr. Xu’s actions…should reports of his employer be accurate, were likely intended to…

  • contribute to China’s stated necessity to build and sustain a faster growing economy, and
  • be leveraged as political-economic influence against the U.S. in current-future trade negotiations.

Following Mr. Xu’s arrest, the U.S. administration implied the incident may prompt…imposing new (additional) restrictions on foreign (direct) investment in U.S. companies, a move likely directed primarily to China. Should such restrictions be codified, they would serve as an additional tool to further mitigate – limit China’s access to – investment in U.S. companies.  https://kpstrat.com/wp-admin/post.php?post=5969

For readers who may be unfamiliar with espionage...economic, or otherwise, I want to suggest U.S. companies should not anticipate changes will be forthcoming, so keep safeguarding your intangible assets!

Michael D. Moberly  October 12, 2018  kpstrat.com  [email protected]  ‘Business Intangible Asset Blog’ (since May 2006) https://kpstrat.com/blog where attention span, business realities, and solutions meet!

Readers are invited to explore other papers-posts I have developed and published along with a book I authored titled ‘Safeguarding Intangible Assets’ at https://kpstrat.com/books/

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