Strike Back If China Steals IP, Companies Told

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When online attackers operating from China or other countries steal corporate secrets, let businesses strike back and retrieve stolen information from attackers' networks.

That gloves-off approach is just one of many recommendations for combating industrial espionage outlined in a new report from the Commission on the Theft of American Intellectual Property, which is headed by the former director of national intelligence, Dennis Blair, as well as Jon Huntsman, who's served as the governor of Utah as well as U.S. ambassador to China.

"China is two-thirds of the intellectual property theft problem, and we are at a point where it is robbing us of innovation to bolster their own industry, at a cost of millions of jobs," Huntsman told The New York Times. "We need some realistic policy options that create a real cost for this activity because the Chinese leadership is sensitive to those costs."

[ For another viewpoint, read Don't Blame China For Security Hacks, Blame Yourself. ]

The report offers 21 specific recommendations, including increasing the budget of the FBI and Department of Justice to investigate trade theft and amending U.S. counter-espionage laws to allow businesses that suffer intellectual property (IP) theft to sue foreign organizations for damages. It also advocates longer-term measures, such as rating countries on their ability to protect IP, as well as ensuring that U.S. officials "push to move China, in particular, beyond a policy of indigenous innovation toward becoming a self-innovating economy."

Indigenous innovation refers to the Chinese government's current policy of investing billions of dollars for research and development in Chinese technology businesses. But according to the Organization for Economic Cooperation and Development, too much of that money goes into development and not enough into research, creating an environment in which homegrown innovation fails to flourish, in part because of piracy.

The IP Commission's report echoes that assessment, noting that "with rare penalties for offenders and large profits to be gained, Chinese businesses thrive on stolen technology." According to estimates cited in the report, China accounts for between 50% and 80% -- depending on the industry -- of the world's IP theft.

"I've often told victims the quote by David Etue, that one only need worry about the enemy who understands that they can spend $1 billion to compete with you or $10 million to steal what you developed," said Nick Selby, CEO of StreetCred Software, on the Police-Led Intelligence blog. "This report bears that concept out."

But the report also urges U.S. businesses to take the information security threat more seriously, saying that too many organizations fail to master vulnerability management practices or layered defenses.

As noted, the commission's report calls for businesses to be allowed to recover stolen IP from attackers' networks -- "without damaging the intruder's own network" -- and to prevent stolen information from being used, through legal means. The report also calls on Congress to pass laws allowing businesses to pursue "a range of more aggressive measures that identify and penalize illegal intruders into proprietary networks," provided those measures avoid collateral damage.

"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," said the report.

The report comes as many businesses are seeking terms of engagement for responding to online attacks. Currently, businesses have some latitude in how they respond, such as being able to conduct reconnaissance of suspected malicious infrastructure or socially engineering attackers -- corporate counsel permitting. But questions remain. For example, can -- or should -- businesses be allowed to hire the equivalent of cyber-Pinkertons to take the fight to online attackers?

Not everyone agrees with the IP Commission's strike-back recommendations. "This is a remarkably bad idea that would harm the national interest," said James A. Lewis, senior fellow and director of the Technology and Public Policy Program at the Center for Strategic and International Studies (CSIS), in an essay titled "Private Retaliation in Cyberspace."

"Our goal is to make cyberspace more stable and secure, not less. Endorsing retaliation works against that goal in many ways, all damaging," he said.

Furthermore, state-sanctioned retaliation could backfire. "The United States is also a leading proponent of the Budapest Convention on Cybercrime, to which we and many other countries are signatories," Lewis said. "Under this convention, private retaliation would be a crime. The victim could reasonably ask the United States to assist in an investigation and extradite those found guilty. They could then bring suit against the perpetrators in U.S. courts."