White House targets trade secret theft with new strategy

WASHINGTON Wed Feb 20, 2013 11:05pm IST

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WASHINGTON (Reuters) - The White House will tackle the theft of U.S. trade secrets on Wednesday with a new strategy to protect American companies from losing hundreds of billions of dollars in an area of growing concern in relations with China.

"For an economy like ours, that's going to win based on our innovation of what we produce and create, this is a critically important issue," U.S. Trade Representative Ron Kirk said in an interview ahead of the event.

The Obama administration will release its plan one day after a U.S. computer security company said it believed a secretive Chinese military unit was behind a series of hacking attacks.

China flatly denied the accusations made by the company, Mandiant, calling them "unprofessional." Its Defense Ministry said hacking attacks are a global problem and that China is one of the biggest victims of cyber assaults.

An administration official said the new strategy "coordinates and improves U.S. government efforts to protect the innovation that drives the American economy and supports jobs in the United States."

"This strategy is not focused on any one country, nor is it focused on cybersecurity exclusively, though cyber does play an important role," the official said.

Kirk said the problem of trade secret theft in China was a factor in at least some U.S. companies deciding to move operations back to the United States.

The companies have "had very frank conversations with the Chinese, (saying) 'you know it's one thing to accept a certain level of copyright knock-offs, but if you're going to take our core technology, then we're better off being in our home country," Kirk said.

Corporate executives from GE (GE.N) and American Superconductor (AMSC.O), both of which do business in China, will be at the White House on Wednesday to discuss the administration's strategy, along with U.S. Attorney General Eric Holder, Acting Commerce Secretary Rebecca Blank and White House Intellectual Property Enforcement coordinator Victoria Espinel.

Last week, U.S. Representative Dutch Ruppersberger, the top Democrat on the House of Representatives Intelligence Committee, said American companies suffered estimated losses in 2012 of more than $300 billion due to trade secret theft, much of it due to Chinese cyber espionage.

House Intelligence Committee Chairman Mike Rogers, at the same event, said the degree of theft was unprecedented.

"Nation-states like China are stealing intellectual property at a breathtaking pace, taking it back, repurposing and then using it to compete against those very same companies around the world, at a huge disadvantage to the company they just stole it from," Rogers said.

The U.S. Trade Representative's office, in its annual report in December on China's compliance with World Trade Organization rules, said that trade secret theft was a growing problem in the commercial relationship, and that many U.S. companies feared talking openly about it because of the damage that disclosure could cause.

"The United States is concerned about a growing number of cases in which important trade secrets of U.S. companies have been stolen by, or for the benefit of, Chinese competitors," USTR said in that report.

It said American companies have had trouble getting redress through the Chinese legal system in such cases, "despite compelling evidence demonstrating guilt."

"The United States is also concerned that many more trade secrets cases involving U.S. companies and Chinese competitors go unreported, because U.S. companies want to avoid the costs of pursuing legal relief, when weighed against the likelihood of obtaining no redress through Chinese legal channels and the possible commercial repercussions for them if they shine light on the conduct at issue," the report said.

(Additional reporting by Matt Spetalnick; Editing by Doina Chiacu and Bill Trott)

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