Monday, October 18, 2010

Employee espionage steps onto the world stage

A news story caught my eye this morning. It is about a Chinese researcher who worked for Dow Chemical. He is accused of taking technology from Dow Chemical, and using it to start a company in China, with the financial support of the Chinese Government.

Technical espionage has been going on for years, but in the past, it has focused on weapons technology, which was of interest to foreign governments.

Now, emerging economies have a rapidly-growing industrial focus, supported by huge direct government investment. In this innovative environment awash in money, almost any leading-edge technology that can be used to develop a profitable new business is of interest.

As the Chinese industrial base grows, almost every Western company with a sophisticated technology base, and the manufacturing expertise to translate their new discoveries into a reliable finished product, is at risk of having not only their base technology exposed to world view, but also their manufacturing processes, giving any new company in another part of the world a huge leg-up into the industry. More troubling, in many cases, this kind of knowledge theft is being encouraged by some foreign governments, which gives the thieves immunity in their new, foreign, corporate environment.

China now has a killer combination: an industrial base big enough to take advantage of these kinds of illegal technology transfers, and the funding to expedite them. And the rest of the world is catching on. Now there is China India, and a bunch of other Asian countries who are making big Government investments in new companies, and they are looking for "ideas".

In the past, the world attitude has been to let American companies do the heavy hauling on the R&D and manufacturing innovation, and then buy the products from the US. Now that these foreign countries are getting into new product innovation for themselves, they are taking ideas from anywhere, and funding the new companies that are formed to use them, with no questions asked.

Some 20 years ago, it used to only be military secrets that were of concern to the US Government, and much of the law is designed to combat military secrets leaks. Accordingly, the law as it stands is entirely inadequate to protect Western companies from intellectual property depredation.

But the men were arrested before they filed the grant application. The judge in the case concluded in May that the government had needed to prove that the men had “intended to confer a benefit” on China, “not receive a benefit from it.”

This underlines the problem. There seem to be inadequate protections under the law for personal enrichment from technology theft. The law protects against another country's gain from technology theft, which is in line with protecting military secrets. But it seems to offer no protections in the area of industrial espionage, where the thieves are entrepreneurs attempting to enrich themselves in an industrial market.

It also raises interesting questions that must make us revisit the fundamental US approach of keeping Government at arms-length from business investment. It seem that the Chinese experiment, which involves very large Government participation in industry, seems to be a successful one.

However, in the US, Government involvement in industry is relegated to assisting industry, either by developing new technologies, or providing subsidized loans to new companies in desirable industries, and leaving the private investors to reap all the benefits.

The National Institutes of Health spend tens of billions of dollars on research every year. They have no industrial income that defrays these expenditures in a meaningful way, and often their discoveries languish for lack of private investment, which would need to develop manufacturing techniques and corporate structure to exploit these new discoveries.

There are many other US government research departments that likewise develop a huge library of new discoveries that are not industrialized.

Now, it seems the Chinese government is prepared to bite this bullet, and they stand to benefit from their direct ownership of the companies they invest in to bring the technologies to market. They are also prepared to use their universities and government research institutes to develop the technology that these new companies will employ, because their shareholdings in the companies that will exploit their research will directly benefit them in the future.

It is logical (maybe not ethical) in this environment to steal as much technology as possible, because it saves repeating the costly research. And if such theft is protected by the Chinese government (which is easy, because they control the investigations inside China, where all the evidence is, in the factories that are employing the stolen technology).

So America needs to do two things immediately.

First, revisit the law, and ensure that laws are passed that give US companies adequate protections against intellectual property theft.

The second is to examine how technology can get from US government research organizations into the hands of consumers in a more efficient manner. In the past, the US has been looked to as the country that is the innovator, with Japan being regarded as the second fall-back.

The world has changed. The US economy is faltering, and I see no improvement in the US economy on the near horizon. It is time for a complete re-examination of US government participation in business, and the changes that need to be made to dramatically improve American efficiency in technology exploitation.

But then, I could be completely wrong. And maybe it simply doesn't matter. Or the problem is unfixable. Give it some thought, and leave a comment.

1 comment:

  1. "It is logical (maybe not ethical) in this environment to steal as much technology as possible". That is so true. It seems unstoppable. The world today is smaller in travel time than California was 100 years ago. The world is kinda like Afghanistan, with a bunch of tribal warlords, such as Obama and Putin, running overlapping territories, and of course one territory steals from another--that's what intelligent marauding primates do. So, maybe we just have to somehow federalize the nations--make them states in one global nation (which would be much, much smaller in travel time than the United States was in 1776, when it made sense to federalize THOSE states), and then the technology would belong to all of us and help all of us.

    If you read the stark reality set down by Paul Craig Roberts in a recent essay, "The War on Terror", you really don't worry too much about America winning out over other countries who are stealing our technology. More, you worry about America turning to total hell for its Nazi-like global behavior.

    Also, look at this animated obesity map of the USA.
    We are fucking dying, and it happened suddenly, in a decade. It's like watching an organism getting very sick, like watching an organism dying. And this map shows you where the "cancer" is concentrated.

    It's suddenly "in" to talk about overpopulation again. So how about 13,000,000 new humans every month, a New York City's worth of people added to Earth every two weeks.

    Sorry for changing the subject about 3 times in one comment to your good article. I guess I just think it's time for progressives to stop acting like everything is fairly normal and that all we have to do is change a few laws and everything will get better . . .

    Jeff Syrop