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Hundreds of billions of dollars of intellectual property (IP) end up stolen each year, a new report said.

On top of that, between 50 percent and 80 percent of all IP theft originates in China, according to the Commission on the Theft of American Intellectual Property, an independent commission focused on the threat of intellectual property from U.S. companies.

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The commission goes on to say the U.S. government should take stronger action against government-sanctioned IP theft.

The problem of IP theft through various means such as espionage, cyber attacks has been a growing concern for U.S. politicians and policymakers over the last couple of years, although the issue has existed much longer than that. Congress and the Obama administration have spoken publicly about the problem and have said they will discuss the issue directly with China. The report from the IP Theft Commission, led by Jon Huntsman Jr., former ambassador to China, and Dennis Blair, the former director of national intelligence for Barack Obama, lays out the problem in detail and recommends U.S. officials strengthen their response.

Cyber Security

“The annual losses are likely to be comparable to the current annual level of U.S. exports to Asia—over $300 billion. The exact figure is unknowable, but private and governmental studies tend to understate the impacts due to inadequacies in data or scope. The members of the Commission agree with the assessment by the Commander of the United States Cyber Command and Director of the National Security Agency, General Keith Alexander, that the ongoing theft of IP is ‘the greatest transfer of wealth in history’,” the report said.

The nature of IP theft makes it impossible to pin down an exact dollar value for stolen property, but security experts and politicians agree it represents a serious threat. The commission’s report recommends a broad range of actions to address the problem, including denying access to the U.S. banking system to companies engaging in IP theft, giving more green cards to foreign students who earn relevant science and technology degrees in the U.S. and amending the Economic Espionage Act to allow companies to sue for damages from IP theft.

But the section that’s likely to draw the most interest in the security community is the one that recommends U.S. businesses have the ability to use electronic means to retrieve stolen files from attackers’ networks.

“Without damaging the intruder’s own network, companies that experience cyber theft ought to be able to retrieve their electronic files or prevent the exploitation of their stolen information,” the report said. “Both technology and law must be developed to implement a range of more aggressive measures that identify and penalize illegal intruders into proprietary networks, but do not cause damage to third parties. Only when the danger of hacking into a company’s network and exfiltrating trade secrets exceeds the rewards will such theft be reduced from a threat to a nuisance.”

The commission’s report mentions a number of countries as being major actors in IP theft operations against the U.S., but singled out China as the worst offender.

“A confluence of factors, from government priorities to an underdeveloped legal system, causes China to be a massive source of cyber-enabled IP theft. Much of this theft stems from the undirected, uncoordinated actions of Chinese citizens and entities who see within a permissive domestic legal environment an opportunity to advance their own commercial interests. With rare penalties for offenders and large profits to be gained, Chinese businesses thrive on stolen technology,” the report said.

Click here to download the report.

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