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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