* Trade secret theft costs $300 billion, 2.1 million jobs
* China responsible for 50 percent to 80 percent of theft
* U.S. responses to date too slow for growing problem
By Paul Eckert
WASHINGTON, May 22 Theft of trade secrets,
chiefly by China, costs the U.S. economy $300 billion a year and
must be fought with sanctions as tough as those used against
terrorism and drug trafficking, an advisory panel said on
The Commission on the Theft of American Intellectual
Property said U.S. responses so far, using the World Trade
Organization and government talks, have not kept up with the
fast growth of trade secret theft by cyber and traditional
"The scope of the problem requires stronger action,
involving swifter and more stringent penalties for IP theft,"
said the non-partisan commission's report, compiled by former
senior government, military and industry leaders.
The panel recommends making the president's national
security advisor the chief policy coordinator of an all-out U.S.
drive to protect intellectual property and punish theft.
Intellectual property thieves should be hit with a mix of
banking sanctions, bans on imports and blacklisting in financial
markets, said the commission, which has shared its 89-page
report with Congress and the Obama administration.
"The banking system has a very well-developed system of
denying the ability to change money for companies and other
organizations that either support terrorism or are involved in
drug activities," said former U.S. Director of National
Intelligence Dennis Blair, a co-chairman of the commission.
"It's a killer sanction for a company that's attempting to
go international," he told reporters in Washington.
CHINA STANDS OUT
China accounts for between 50 and 80 percent of intellectual
property theft, said the report, which also cites India and
Russia as other problem countries, based on data from customs
seizures and other trade figures.
"National industrial policy goals in China encourage IP
theft, and an extraordinary number of Chinese in business and
government entities are engaged in this practice," it said.
President Barack Obama could help the issue "get traction"
by raising it in his meeting with his Chinese counterpart, Xi
Jinping, in California in early June, said former U.S.
Ambassador to China Jon Huntsman, also a commission co-chairman.
"The president sets the priorities for the U.S.-China
relationship, and this clearly would have to be at the top of
our economic agenda," he said.
Leaving it to bilateral economic talks like July's Strategic
and Economic Dialogue would continue unproductive "jaw boning"
while the problem gets worse, Huntsman added.
MOST THEFT HAPPENS INSIDE U.S.
Other recommended responses include immediate confiscation
of goods containing stolen intellectual property and making
respect for IP rights a condition for investing or listing
shares in the United States.
The commission recommends beefed-up protections to make U.S.
data less vulnerable to hackers, as well as enhanced measures
such as "water marking" or "beaconing" that allow companies to
identify stolen files and make them inoperable.
But it stops short of calling for what panel member Craig
Barrett, former chairman and chief executive of Intel
Corporation, described as "the nuclear option" of authorizing
counter attacks against hackers, citing legal questions and fear
of collateral damage.
The report recommends committing more resources to
investigating and prosecuting cyber-theft of trade secrets, but
says intellectual property stolen via the Internet is only a
portion of theft.
"Much of it occurs the old-fashioned way," through copied or
stolen hard drives, bribing or planting of employees, tapping of
phones, pirating of software and the reverse engineering of
products, it said.
While credible reports have emerged of Chinese army hackers
raiding U.S. government and industry computers, the report said,
"In reality, most IP theft is committed within American offices,
factories, and even neighborhoods and homes."
Beyond the $300 billion in economic losses, equal to the
annual value of U.S. exports to Asia, the United States loses
some 2.1 million jobs each year to IP theft, Huntsman said.
Intellectual property theft through actions ranging from
software piracy to patent or trademark infringement to
cyber-espionage also depresses research and development spending
and stymies future innovation, the commission said.
The report is posted here
(Editing by Philip Barbara)