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

Page 6

The report also highlighted the evidence of links between copyright and trademark infringements and more serious crimes. In 37 percent of the cases, counterfeiters were involved in drug trafficking; in 20 percent of cases, they carried weapons; in 11 percent they committed other frauds, and in 26 percent they carried out other crimes such as assault, extortion, murder, theft, immigration violations, money laundering, identity theft and robbery. Increasingly, violent criminals are becoming involved because the profit margins are higher, and penalties and chances of being arrested are relatively low.

Conclusion

Today, the U.S. economy faces many threats, including spiraling energy costs, corporate governance abuses, huge federal deficits, foreign ownership of the national debt, the loss of jobs to offshore outsourcing and the impact of disasters (whether terrorist related or environmental). And of course, there is the looming possibility of a bird flu pandemic or other global health emergency that could result in the closing of borders, the interruption of business, the cessation of travel and the deaths of many thousands.

But as you can see from this overview, there is another threat, difficult to quantify or even detect, one that has not yet grabbed the headlines or captured the imagination, and yet is relentlessly and efficiently looting, pillaging and plundering the U.S. and global economies of the magic ingredient-i.e., trade secrets.

Economic espionage is as real a threat as terrorism or global warming. But it is subtle, insidious and stealthy. Even if the United States finds the will to come to grips with the many threats it faces, this silent, invisible hemorrhaging of intellectual know-how and trade secrets could deliver the death blow to our pre-eminent place in the global economic world before we even wake up to the magnitude of the danger.

According to the U.S. Commerce Department, intellectual property theft is estimated to top $250 billion annually (equivalent to the impact of another four Katrinas), and also costs the United States approximately 750,000 jobs, while the International Chamber of Commerce puts the global fiscal loss at more than $600 billion a year. But both estimates appear to be woefully underestimated; by some other estimates, there was over $251 billion worth of intellectual property lost or illegal property seized in August 2005 alone.

The United States, like other great nations, stands on three legs: military power, political power and economic power. Arguably, economic power is the most vital of the three. Without economic power, the political elite would be bereft of the consultants and lawyers who insulate it; it would have nothing to bargain with at the geopolitical roulette table, and it would lack the bureaucratic muscle to impose its will domestically. Without economic power, the military would be unable to deploy advanced weapons systems, spy on its enemies from space, span the globe with bases or even raise an army.