Last year, when leaders of the world’s wealthiest nations met at Camp David, they had before them an agenda that was pressing and challenging. European economies were wobbling, the military drawdown from Afghanistan was on the table and the situation in Syria was going from bad to worse.
It was noteworthy that, in this context, the Group of Eight leaders embraced the protection of intellectual property rights as a key issue. They highlighted the importance of intellectual property as an engine for job creation and economic growth. And they affirmed the critical importance of taking legal, diplomatic and private sector measures to prevent IP theft throughout global supply chains.
“Given the importance of intellectual property rights (IPR) to stimulating job and economic growth, we affirm the significance of high standards for IPR protection and enforcement, including through international legal instruments and mutual assistance agreements, as well as through government procurement processes, private-sector voluntary codes of best practices, and enhanced customs cooperation, while promoting the free flow of information. To protect public health and consumer safety, we also commit to exchange information on rogue Internet pharmacy sites in accordance with national law and share best practices on combating counterfeit medical products.”
—Camp David declaration, May 19, 2012.
It was a positive signal in a world marketplace where counterfeiting, cyber-theft and myriad other schemes are evolving rapidly, leading to the misappropriation of valuable intangible assets — acts that undermine companies and trust in global trade and can create serious health and safety hazards.
But as the G8 summit approaches again, have these nations made progress on last year’s commitment to the IP issue?
The problem is growing and not going away on its own. The theft of intellectual property accounts for $500-600 billion in lost sales each year, or 5-7% of world trade. Adulterated ingredients have repeatedly made their way into pharmaceuticals and substandard counterfeit parts and materials have been discovered in U.S. military equipment, raising serious health and safety concerns.
It is vital that G8 leaders now take action against intellectual property rights violations — for the sake of companies and their employees, for the safety of consumers, and to prevent the erosion of innovation and of trust in the global trading system.
At the upcoming G8 meeting in Northern Ireland, we urge the leaders to report on what they have done so far to stem intellectual property theft. And, going forward, we believe that the body should create a working group with a transparent public agenda and an avenue for private sector involvement, followed by progress reports in subsequent annual summits.
While the G8 must explore the legal measures, multilateral efforts and enforcement actions named in last year’s declaration for addressing the intellectual property theft problem, one of the most promising approaches is also the one that is closest at hand: private sector voluntary codes of best practices.
Put another way, it is vital for global companies to evaluate and build management systems for the prevention of IP theft and corruption, and see that all business partners and members of their global supply chains learn and adopt a similar approach.
Private sector prevention is critical because there is a limit to the scope and reach of government regulation, especially in key emerging markets where those legal structures remain weak.
Moreover, enforcement actions, including retaliatory trade measures, may be essential tools, but they usually cannot undo the damage that has been done by trade secret theft or counterfeiting.
Take, for instance, one of the high-profile cases: A Ford Motor Company employee, as he left the company, first copied some 4,000 Ford documents onto an external hard drive, which he took with him to his new job at Beijing Automotive. Yu Xiang Dong was sentenced to 70 months in federal prison for theft of trade secrets and economic espionage, but the genie was out of the bottle: Ford valued the loss of the trade secrets at $50 million dollars.
The White House tacitly acknowledged the importance of private sector prevention efforts by making them the “second pillar” in its “U.S. Strategy on Mitigating the Theft of Trade Secrets” published in February.
The report urges U.S. companies that source and operate internationally to carefully evaluate their security policies around information systems, physical systems, human resources and research and development, and vows to highlight and support the leading practices that emerge.
We believe these assessments and adoption of best practices by global companies—as well as their business partners and suppliers—can go far to prevent the theft of valuable assets and mitigate the risks of counterfeit parts and ingredients, even when supply chains have links in markets where regulation is weak.
Through our initial work in this area, we have gained insights on how the supply chain approach to prevent IP theft can bolster trust in global companies in many sectors, and provide suppliers in emerging markets with a competitive edge as they pursue status as an international player.
We urge G8 leaders to continue the work on intellectual property protection from last year’s summit and highlight the promise of industry-led measures as a starting point in building a robust culture of compliance and fairness in the complex international trading system.