When it comes to safeguarding America’s trade secrets — and the jobs that depend on them — bolstering U.S. law is not enough. The Trans-Pacific Partnership can help to ensure more robust protection abroad as well.
Sophisticated techniques for stealing trade secrets from U.S. companies are being deployed by foreign perpetrators at an unprecedented rate, at a potential cost of billions of dollars.
Two recent cases highlight the challenge. In May, a former employee of PPG Industries was charged with passing trade secrets concerning manufacturing specifications to a Chinese glass company. In another case, six Chinese scientists were charged in federal court for economic espionage involving two U.S. technology companies.
The protection and enforcement of trade secrets varies significantly from country to country — and are wholly inadequate in many of them. Despite the aspirations of the World Trade Organization’s agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the strength and enforceability of trade secrets rights globally are of varying quality. These conditions create market access barriers for U.S. firms, discouraging investment in R&D and hindering broad economic growth and prosperity.
Despite the lack of strong global enforcement mechanisms, U.S. trade policy can go a long way toward addressing the shortcomings. The annual Special 301 Report from the United States Trade Representative’s office (USTR) brings into sharp focus the inadequacy of trade secrets protection and enforcement by some of our most important trading partners. The report underlines the increasingly urgent need for trading partners to effectively combat trade secret theft, highlighting escalating threat levels and gaps in protection and enforcement worldwide. Not only does economic espionage threaten to diminish U.S. competitiveness around the globe — putting American jobs at risk — but the report also warns of the threat to U.S. national security interests from stolen critical commercial and defense technologies.
One trading partner given special attention in the Special 301 report is China, whose ineffective remedies and weak enforcement system result in an increasingly challenging environment for doing business. In a recent US-China Business Council survey, a record 40 percent of U.S. companies who participated cited protection of trade secrets as their greatest concern when doing business in China.
While China and other Asia-Pacific countries with weak protection and enforcement regimes for trade secrets pose great challenges for U.S. companies, they also offer some of the greatest economic opportunities. Over the next five years, nearly half of the world’s growth will be in the Asia-Pacific region, according to the International Monetary Fund, The region is expected to achieve GDP growth of 5.5 percent or more this year and next — significantly higher than the expected rate in the U.S.
Given the economic importance of the Asia-Pacific region, negotiations with trading partners to harmonize trade secret laws throughout the region are critical. The Trans-Pacific Partnership (TPP) agreement, being negotiated among the U.S. and 11 nations in the Asia-Pacific region, could have a significant impact on intellectual property protections. The TPP is a state-of-the-art agreement among some of the world’s most robust economies, representing approximately 40 percent of global GDP. If concluded, the TPP will address many cross-cutting trade issues, including the protection of trade secrets and other forms of intellectual property.
While the proposed text has not been made public, the U.S. is reportedly pushing to strengthen enforcement by requiring criminal penalties to be established in TPP countries. If concluded, the TPP would improve trade secrets enforcement in one of the most economically significant regions of the world, enabling American businesses to more confidently access approximately 798 million consumers.
Robust protection of trade secrets — the “secret” to America’s success, both at home and abroad — is the winning formula for the global competitiveness of U.S. businesses.
(Top image: Courtesy of tupungato, iStock Editorial)
This is part two of a two-part series exploring the challenges and complexities surrounding trade secrets protection in the U.S. and around the world. To read part one on how U.S. laws can better enforce trade secret theft, click here.
Nicole Y. Lamb-Hale is a Senior Vice President at Albright Stonebridge Group (ASG) where she provides strategic advice to companies as they develop and implement their global business objectives, including the expansion of their exports to, and presence in, international markets. Lamb-Hale also serves as Vice Chair of the National Alliance for Jobs and Innovation. Prior to ASG, she served as the Assistant Secretary of Commerce for Manufacturing and Services in the International Trade Administration. Lamb-Hale was previously the Managing Partner of the Detroit office of international law firm, Foley & Lardner LLP, where she specialized in business restructuring in the manufacturing sector.