Las Vegas Sun

March 29, 2024

Guest Column:

U.S. leads in technology innovation; don’t let other countries steal our secrets

The U.S. economy has undergone a major shift in the past 50 years. Because of our involvement in World War II, the United States established a pre-eminent industrial base. We essentially produced everything the world wanted. By exporting our goods, our economy thrived and our people collected high wages. This created a huge disparity in wages of workers relative to those in less developed countries.

Being capitalists, U.S. businesses gradually shifted manufacturing to such low-wage countries in Asia. Because of this shift and transfer of associated U.S. technology, these Asian countries became rapidly industrialized.

Hardly a day goes by without doomsayers lamenting that everything we consume is now made in China. They cite our gridlocked political system, the deepening income and wealth inequalities and the growing clout of China and Russia as proof that America is on the decline.

The truth is that the United States migrated to a knowledge-based economy by relentless and continuous innovation. This migration has been accelerating at an incredible pace in the past two decades. The creation of the Internet, social media, new communication, transportation and e-commerce are the innovations that are the driving forces.

Innovative uses of the Internet and information technologies including effectively managing Big Data in cloud storage, 3-D printing, and the growing communication between electronic devices (known as the Internet of Things) are poised to transform our industrial base. The automation and robotization of U.S. manufacturing plants are further increasing productivity, efficiency and precision. As robotics capabilities increase, the cost of production of goods will decrease. The downside is that these machines are likely to displace many workers. Nevertheless, a reinvigorated U.S. economy is capable of putting a much larger portion of our population to work and keep unemployment low without risking wage inflation.

Because of our innovation and lowered energy costs, companies already are relocating their manufacturing operations here from Asia to additionally benefit from savings in transportation costs and proximity to their U.S. research and design centers. Our industrial sectors are once again becoming the most competitive in the world. We had the strongest recovery of most developed countries, and consumer sentiment, as measured by the University of Michigan, rose to 86.9 — the highest since the Great Recession.

As our economy recovers, businesses need to be exceptionally cautious as other countries may face reduced demand for manufacturing upon which they thrived in the past. Importantly, technology transfer from the United States may slow down and these countries have fallen behind in innovation. This creates a perfect storm for them to catch up with the United States by taking the path of least resistance — by stealing our trade secrets.

Trade secrets are the fruits of our knowledge-based economy. Trade secrets presage all intellectual property and transform into patents, trademarks and copyrights upon taking certain legal measures. The confidential tools and systems built around corporate knowledge management are the modern face of trade secrets. For example, proprietary databases that capture credit-card data give a competitive advantage to the credit card company. Trade secrets are vulnerable. Once they are stolen, it can be incredibly difficult to stop their further dissemination and free use.

Laws to protect trade secrets exist in the United States at the state level (the Uniform Trade Secrets Act) and at the federal level (the Economic Espionage Act). They carry hefty civil and criminal penalties for violation. The Department of Justice has been intensifying industrial espionage of trade secrets by foreign countries. However, American companies have been lax when it comes to protecting trade secrets.

If appropriate steps are not taken, it could turn us into philanthropists and rob us of our competitive commercial advantage. The first step is to place such secrets under a cyberlock with correctly configured firewalls — the equivalent of an unbreakable safe — and limit their access to authorized people.

Industrial espionage by foreign countries has reached a feverish stage. Cyber hacking by using sophisticated networks is the most favored weapon to steal our industrial secrets. Estimating the cost of cyber-espionage is tricky, but some economists estimate the loss is as high as $120 billion annually.

China has a growing investment in its cyber espionage infrastructure and organization. In addition to using a vast network of agents, it recruits employees of U.S. companies to collect and steal our cutting-edge technologies and business intelligence. China places intense pressure on American companies to transfer technology to their Chinese partner companies under the guise of a joint venture as part of doing business in there. To remain competitive, the U.S. partners are almost always willing to do so.

The operators behind China’s espionage are the military often disguised as state-owned enterprises. Such enterprises are under intense pressure from their leaders to innovate and bring new technologies to the domestic market before the foreign firms can. However, China’s record of genuine innovation remains paltry. Stealing information from U.S. companies is a cheaper and faster way to remedy innovation deficits and they have taken this path of least resistance.

China’s stealing machine is not limited to commercial secrets. China, along with Russia, Iran and North Korea, are intruding our military establishment and government agencies to steal our military secrets and gain access to our national security intelligence. Russia and China are now colluding after the West ratcheted up economic sanctions on Russia over the escalating Ukraine conflict.

As our economy moves to new heights, eternal vigilance to safeguard our innovation is imperative. In addition, our leaders should persuade Russia and China, the two most important points of resistance, to abide by a rule-based marketplace. The rule is simple: Thou shall not steal!

T. Rao Coca, Ph.D., J.D., is an intellectual property consultant. He is a former vice president of intellectual property of IGT. He lives in Henderson.

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