In Depth

Industrial Espionage: Secrets Stolen, Fortunes Lost

How industrial espionage and intellectual property theft destroy businesses and endanger the global economy.

By Richard Power and Christopher Burgess

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U.S. corporations must take appropriate steps, on their own initiative, and incorporate security procedures in order to effectively protect their intellectual property against the efforts of foreign governments eager to obtain it.

Part III: When Counterfeiters, Pirates and Organized Crime Target Products

The counterfeiting and piracy of products, activities often sponsored by organized criminals, make up the most insidious intellectual property threat, and certainly the most pervasive threat to the global economy as a whole.

The U.S. Chamber of Commerce estimates that counterfeit and pirated products account for 5 percent to 7 percent of the global economy, and results in the loss of more than 750,000 jobs and approximately $250 billion in sales to the United States alone.

Via trade missions and educational programs, the chamber has directed its efforts at China, Brazil, South Korea and Russia, and toward the goal of encouraging enhanced enforcement of intellectual property protection laws within these countries. In addition, it offers an intellectual property protection toolkit for each of these countries. And in 2005, working with various law enforcement entities, the chamber initiated Strategy Targeting Organized Piracy (STOP).

In the United Kingdom, the Alliance Against IP Theft has produced a 40-page primer, Proving the Connection: Links Between Intellectual Property Theft and Organised Crime, detailing the deleterious effect on the U.K. economy, and the clear and unambiguous involvement of organized criminal elements. It cites case studies identifying organizations with points of origin in Russia, South Asia, China and Ireland, which serve as points of origin for either the financial backing to achieve the manufacture, distribution and sale of pirated and counterfeit goods in the United Kingdom, or as points of origin for the counterfeit goods themselves. The alliance puts the value of these illegal items at more than 9 billion pounds.

Software

According to a global study commissioned by the Business Software Alliance, piracy rates in 50 countries have increased over the prior year.

Technology

Counterfeiting, of course, isn't limited to software.

Shoes and Apparel

Counterfeit shoes are commonplace in the open markets of Southeast Asia.

Entertainment

A few successful cases against individuals for illegal file sharing do little to stanch the estimated $3 billion in losses due to piracy of motion pictures.

According to the DOPIP Security Counterfeit Intelligence Report, in October 2005 alone, there were more than 341 separate incidents involving goods valued at more than U.S. $1 billion, and involving more than 54 separate countries. Not surprisingly, the top 10 brands counterfeited included Adidas, Nike, Louis Vuitton, Microsoft, Chanel, Gucci, Prada, Fendi, Manchester United and Puma.