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IPEC Joint Strategic Plan: Impact of Trade Secret Theft and Executive Legislation

February 22, 2017
Categories: Intellectual Property, Intellectual Property Protection, IP Protection, Trade Secret Theft

Every three years, the White House is required to provide a report on Intellectual Property protection efforts by the Intellectual Property Enforcement Coordinator (IPEC). The Joint Strategic Plan on Intellectual Property Enforcement, released by the previous White House administration in December 2016, demonstrates the negative impact of trade secret theft on the US economy and national security. The economic effect of trade secret theft is estimated to be in the range of 1 to 3 percent of US GDP, according to a CREATe – PwC report. In total, the National Security Agency (NSA), the Federal Bureau of Investigation (FBI), and the Commission on the Theft of American Intellectual Property estimated the annual loss to the economy reaches into the tens to hundreds of billions of dollars.

Protecting trade secrets is an essential aspect of economic prosperity. According to the Joint Strategic Plan, trade secrets are estimated to be worth $5 trillion to American businesses. Systemic theft of these trade secrets poses other dangers by compromising personally identifiable information (PII), payment data, and personal health information (PHI). A corporate breach also has external costs that include technical investigations, customer breach notifications, post-breach customer protection, the implementation of regulatory compliance measures, public relations issues, and so on. Indirect costs of such a breach could include an increase in insurance premiums, operational disruptions, damage to customer relationships, value of lost contract revenue, increased cost to raise debt, among others. The following diagram elaborates upon the internal and external cost of trade secret theft:

The legal ramifications of breaches are high for victims as well as perpetrators, and the severity of punishment increases on a country-by-country basis. In the case study of United States v. Kolon (2015) presented in the Joint Strategic Plan, South Korean corporation Kolon Industries Inc. was found guilty of conspiracy to steal EI DuPont de Nemours & Co. trade secrets for making Kevlar, a strong synthetic fiber and industry secret. Kolon was ultimately sentenced to pay $275 million to DuPont and $85 million in fines to the government.

The Joint Strategic Plan also calls upon the US to lead international efforts to promote more responsible state behavior as a means to enhance international cyber stability by reducing the risk of escalation. The Plan concludes that federal government can help mitigate trade secret misappropriation through improved coordination, law enforcement, diplomacy, and public education and outreach efforts.

Read the full report here.

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