Wednesday, 1 March 2017

John Huntsman and the Commission on the Theft of American IP's New Update

In an interesting development, John Huntsman, Jr. is being considered by the Trump Administration for the position of ambassador to Russia.  Mr. Huntsman was the previous U.S. ambassador to China (Obama Administration) and Singapore (G.H. Bush Administration), and was a credible candidate for the U.S. Presidency in 2012.  Importantly, Mr. Huntsman is also the co-chair for the Commission on the Theft of American Intellectual Property.  In 2013, the Commission released its first Report on the Theft of American Intellectual Property.  Recently, on February 27, 2017, the Commission released an Update to the IP Commission Report of 2013.  The new Update states:

Since 2013, at the release of the IP Commission Report, U.S. policy mechanisms have been markedly enhanced but gone largely unused. We estimate that the annual cost to the U.S. economy continues to exceed $225 billion in counterfeit goods, pirated software, and theft of trade secrets and could be as high as $600 billion.1 It is important to note that both the low- and high-end figures do not incorporate the full cost of patent infringement—an area sorely in need of greater research. We have found no evidence that casts doubt on the estimate provided by the Office of the Director of National Intelligence in November 2015 that economic espionage through hacking costs $400 billion per year.2 At this rate, the United States has suffered over $1.2 trillion in economic damage since the publication of the original IP Commission Report more than three years ago.

The Update notes that since the publication of the first Report that several recommendations were adopted by Congress and the Obama Administration including enactment of the Defend Trade Secrets Act, the 2015 National Defense Authorization Act , The National Cybersecurity Protection Act of 2014, The Federal Information Security Modernization Act of 2014, The Cybersecurity Workforce Assessment Act of 2014, and The Cybersecurity Enhancement Act of 2014. The Update continues to focus on China as a source of trade secret theft, but notes that cyberattacks from China have decreased.  The Update does hedge and note that this may be hard to measure.  In discussing China’s efforts to protect intellectual property, the Update also states:

To realize those reforms, China’s State Council issued a new action plan in 2016. Building on a 2015 policy document outlining goals to develop a stricter IPR regime, the action plan, titled “Opinion of the State Council on Accelerating the Construction of Intellectual Property Powers for China as an Intellectual Property Strong Country under the New Situation—Division of Tasks,” duplicates standing policy but also lists several priorities for reform of the IPR regime.50 According to analysis by Mark Cohen, a long-standing expert on China’s IP environment, the document suggests that China is making a greater effort to raise the damages a victim can sue for in Chinese courts.51 The action plan also stresses international cooperation and the placement of more IP officials overseas to protect Chinese companies. It goes on to encourage the study of China’s IP-intensive industries and the use of fiscal policy to promote their development.52 Taken as a whole, the plan appears to be more geared toward fostering stronger IP-intensive industries at home than developing the rule of law.

The Update notes that the recent United States Trade Representative’s 301 Report on China states that there are several areas of concern in China’s protection of intellectual property that require attention according to industry, such as the participation of foreign firms in standard setting in China.  Curiously, the Update then points to some potential fields in which it is alleged that state owned enterprises in China may be engaging in theft.  The Update provides two examples of possible issues; however, they both are not concretely closely tied to theft of trade secrets.  More information would be helpful.  The Update also points to state subsidization of industry and underbidding as two potential problems that help Chinese industry to the detriment of U.S. companies.  The Update concludes with a call to the Trump Administration to tackle the theft of intellectual property early in the Administration, and provides a list of recommendations that have not been adopted by the U.S. government.  For additional discussion of IP enforcement in China, please see here, here and here

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