IPC: U.S. Reaction to IP Theft 'Utterly Inadequate'

The U.S. response to hundreds of billions of dollars in intellectual property theft -- "hectoring governments and prosecuting individuals" -- has to date been "utterly inadequate to deal with the problem."

That is according to a just-released report from the bipartisan Commission on the Theft of Intellectual Property (IPC), which can include everything from counterfeit hard goods -- pirated DVDs -- to a host of digital goods including TV and movie content.

The report found that IP theft is north of $300 billion annually, or about the equivalent of all U.S. imports to Asia. That is appropriate, since China remains the number one illegal exporter of U.S. intellectual property according to the report. The committee also calls IP theft the greatest wealth transfer in history, and one that costs millions of U.S. jobs.

And it is not just China. Russia, India and others are also draining U.S. IP coffers thanks to "poor legal environments for IPR, protectionist industrial policies, and a sense that IP theft is justified by a playing field that benefits developed countries."

What's the solution? The IPC has a number of recommendations.

It puts in a plug for passing CISPA, the cybersecurity information-sharing bill backed by cable operators and others -- with amendments if necessary -- though it refers to it only as "a bill in Congress that would allow greater information sharing between government and private business."

Recent efforts to elevate the problem in the policy heirarchy and to tighten economic espionage laws will have a limited effect so long as the incentive structure for IP pirates remains. "Simply put, the conditions that encourage foreign companies to steal American intellectual property must be changed in large part by making theft unprofitable," it says.

Among its solutions for changing those conditions in the near term:

1. Make the president's national security advisor the principal IP protection policy coordinator.

2. Give the secretary of commerce the statutory authority to protect American IP -- nominee Penny Pritzger is being vetted in the Senate Commerce Committee Thursday (May 23).

3. Increase Justice's and the FBI's powers to investigate and prosecute IP theft, particularly cybercrime.

4. Consider IP protection a criterion for approving major foreign investments in the U.S. under the CFIUS (Committee on Foreign Investment in the U.S.) review process.

5. Have FTC sanction foreign companies using stolen IP.

6. Support American companies' efforts to identify and recover IP stolen through cyber means. The commission stops short of recommending that they be allowed to "hack back," which is currently illegal, but does suggest that response is deserving of further study and consideration.

"It is already clear to me that this report is going to make a very important contribution to the discussion about the grave danger that IP theft poses to our economic well-being," said Rep. Mike Rogers (R-Mich.), chairman of the House Permanent Select Committee on Intelligence, who motormanned passage of CISPA in the House earlier this year. "In particular, all should carefully read what the report has to say about Chinese economic espionage. I heartily agree that Congress and the Administration need to act quickly to help American companies defend the hard work and innovation that is the life-blood of our economy. That must begin with getting cyber information sharing legislation signed into law."

The Senate is currently working on its own version of a cybersecurity bill rather than brining up Roger's CISPA bill.

The report was the product of an almost year-long analysis of government and private studies, interviews and impact assessments looking at the affect of IP theft on the American economy. To read the report and all its recommendations, go here.

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.