To catch a criminal, you have to think like a criminal. That's what Sherlock Holmes and other super sleuths espouse as a sure-fire method for outthinking perps and anticipating their next move. It works against counterfeiters, thieves, hackers, pirates, and other criminal types.
Intellectual property theft accounts for billions of dollars of lost revenue and often involves critical compromises in highly sensitive technologies. And a Mandiant report released last month calls China the biggest IP crime boss in history.
Here in America, we understand its methodologies because we have the same skillsets and computer gear. The National Security Agency (NSA) has “listening post” technology available for connection to every cellphone and computer.
Spying on the spies
I am not implying that the NSA is responsible for any IP theft here in the US, but it has access to virtually every digit whizzing through the wired and wireless cloud. Can it decrypt every encrypted signal? Maybe not on the fly, but it does have access, along with codebreaking equipment and personnel.
If you really want to get an appreciation of our cybersecurity knowhow, you should take the time to read the Mandiant report in full. Let's look at it a little closer.
Since 2004, Mandiant has investigated computer breaches at hundreds of organizations around the world. The majority of these breaches are attributed to actors that the company calls the Advanced Persistent Threat (APT).
The report includes a quote from an October 2011 hearing from House Intelligence Committee Chairman Mike Rogers (R-MI):
China's economic espionage has reached an intolerable level and I believe that the United States and our allies in Europe and Asia have an obligation to confront Beijing and demand that they put a stop to this piracy. Beijing is waging a massive trade war on us all, and we should band together to pressure them to stop. Combined, the United States and our allies in Europe and Asia have significant diplomatic and economic leverage over China, and we should use this to our advantage to put an end to this scourge.
China's Ministry of Defense responded to the Mandiant report on Feb. 20: “The report, in only relying on linking IP [Internet protocol] address to reach a conclusion the hacking attacks originated from China, lacks technical proof” of state involvement.
I just had to retrieve the Mandiant report to see what China is using as the basis of its claim of no proof. After reading the report, I had to wonder if the Chinese spokesman had even read the report, or if he was just following explicit instructions from the Propaganda Ministry.
IP theft ROI
This massive amount of ongoing IP theft is heavily impacting the supply chain. Ask yourself, “Why buy something if I can make it myself at a lower cost?” China has stolen so many trade secrets and technologies that not only does it get a huge benefit in reduced R&D spending, but it also can funnel that savings into espionage technologies.
Here are just four examples from a White House report released in February.
Theft of Ford Motor Company Trade Secrets
In April 2011, Yu Xiang Dong was sentenced to 70 months in federal prison for theft of trade secrets and economic espionage. Yu was a former Ford Motor Company employee who resigned to work at Beijing Automotive Company. He copied 4,000 Ford documents onto an external hard drive, which he took to China. Ford valued the loss of the trade secrets at $50 million… Theft of DuPont Trade Secrets
Hong Meng was a research chemist for DuPont. He was involved in researching Organic Light Emitting Diodes (OLED). DuPont's OLED research efforts resulted in the development of a breakthrough and proprietary chemical process for OLED displays. Mr. Meng stole trade secret compounds and passed them to a Chinese university. He was caught by the FBI and prosecuted by the U.S. Attorney's Office for the District of Delaware and was sentenced to 14 months in federal prison. DuPont valued the loss of the trade secrets at $400 million… Theft of General Motors Trade Secrets
On November 30, 2012, a Federal jury in Detroit found Shanshan Du, a former General Motors (GM) engineer, and her husband, Yu Qin… guilty of stealing GM trade secrets related to hybrid vehicle technology worth $40 million. Du and Qin tried to pass the trade secrets to Chinese automaker Chery Automobile Company… Theft of Cargill and Dow Chemical Trade Secrets
In October 2011, Kexue Huang, a former employee of both Cargill and Dow Chemical passed trade secret information to a Chinese university that was developing organic pesticides on behalf of China's government. Financial losses to both companies from his criminal acts exceed $7 million. In December 2011, after many months of hard work by FBI agents, CCIPS prosecutors and the U.S. Attorneys' Offices in Indiana and Minnesota, Huang was sentenced to 87 months in prison — the strongest sentence possible.
These are just four examples. Please read the Mandiant report and see the greater damages it notes.
The cookies are gone, and China has been caught time and time again with its hands in our cookie jar. Even if we put the jar on a higher shelf, the recipe has already been stolen. The next time you buy these cookies, you should take note of the fortune — not the fortune that tells you about your future, but the fortune we have lost in trade secrets.