June 24, 2015

Amid Cyber 'Pearl Harbor,' Congress Considers Making It Easier For China To Steal IP

Ed Martin

6/22/2015 11:34:00 AM - Ed Martin

Just last week, Chinese hackers perpetrated what many are calling a cyber-“Pearl Harbor” of breathtaking scope, covertly downloading the U.S. government's highly private personnel files on millions of its employees. The event, which will make it far easier for Chinese counterintelligence agents to target federal employees for blackmail, is but one of many instances where China, Russia and other foreign countries have demonstrated an aggressive campaign to steal anything of value accessible with a computer.
For the government, that means national security secrets. For businesses, it means intellectual property like patents and trade secrets that give American companies an edge in the competitive international economy. A 2013 study put the estimated losses of this theft at a staggering $300 billion annually, with 70 percent of theft emanating from China. Gen. Keith Alexander, the retired former head of U.S. Cyber Command, called it the “greatest transfer of wealth in history.”
There's a good reason business travelers are urged to use only throw-away “burner” cell phones when traveling to China. A recent security bulletin from North Dakota State University even recommended placing tape over laptop “webcams” to prevent use of the cameras to ward off surreptitious recording by your own device, a disconcerting thought.
While American companies are under siege from Chinese hackers, a new bill gaining traction on Capitol Hill would perversely make it easier for such foreign companies to profit from their stolen intellectual property The bill, called the “Innovation Act” by its sponsors, establishes draconian paperwork requirements for firms seeking to protect their intellectual property in court. The legislation is coming under increasing fire from conservatives and others because while it purportedly targets malicious “patent trolls,” its calls for a fundamental reworking of the American patent system that could have a perilous impact on incentives to invent new technology, especially for small businesses.
Although experts widely agree that “patent trolls” remain a problem in specific circumstances, despite a recent patent reform law, respected voices such as lawyer Richard Epstein warned the bill could “smother” innovation.
Of particular concern to companies are disclosure requirements that could force U.S. firms to reveal sensitive corporate information to the very foreign companies that are working overtime to steal their secrets. Behind the legislation are powerful business interests like Google. Another special interest pushing the bill is America's Health Insurance Plans (AHIP). AHIP is so determined to lower the costs of their intellectual property lawsuits that they're putting America's genius patent system on the precipice of disaster.
ZTE Corp., a Chinese telecom firm previously flagged as a “security threat” to the U.S. by Congress, shamelessly joined Google, AHIP, and the other special interests in a coalition pushing to pass the bill.
Although it's clear why ZTE might want to join the coalition, the fact that its U.S. members seem unconcerned about its inclusion is more worrying. Last week, as news broke about the startling hack of the Office of Personnel Management's files by Chinese hackers, the Innovation Act was recorded by the House Judiciary Committee, chaired by Rep. Bob Goodlatte (R-VA). It's time for U.S. lawmakers to appreciate the threat facing their country. Goodlatte should go back to the drawing board on his bill and draft legislation that doesn't help bad actors in China.