ENFORCEMENT

Office of the Intellectual Property Enforcement Coordinator
2. Assessments of the Scale and Economic
Impact of Trade Secret Theft.
The protection of trade secrets is critical to protecting
the fruits of American labor, ensuring that American
businesses have an incentive to innovate, and enabling
continued economic prosperity in a technology-driven
age. 18 Trade secrets are estimated to be worth $5 trillion
to American businesses. 19
The magnitude of trade secret theft is substantial,
and the frequency appears to be increasing. The Center
for Responsible Enterprise and Trade, for example,
conducted a study relying on surrogate indicators and
leveraged multiple studies on illicit economic activity in
an effort to quantify the impact of trade secret theft. It
estimated the theft to be in the range of 1 to 3 percent of
U.S. GDP. 20 Reports from the National Security Agency
(NSA), the Federal Bureau of Investigation (FBI), and
the Commission on the Theft of American Intellectual
Property have placed the estimated losses to the U.S.
economy from trade secret theft at tens to hundreds of
billions of dollars annually. 21
According to the U.S. Department of Justice,
“billions of U.S. dollars are lost annually to foreign
competitors who pursue unlawful commercial short
cuts” by stealing U.S. innovation and technology. 22
Notwithstanding the difficulties of criminal and civil
prosecution due to the international dimensions often
associated with trade secret theft, cases that have been
successfully prosecuted to completion (see sidebar as an
example) give an insight as to the significant damages
to which U.S. businesses may be exposed when their
trade secrets are targeted.
United States v. Kolon
In 2015, Kolon Industries Inc., a South Korean
industrial company, pleaded guilty to conspiracy
to steal E.I. DuPont de Nemours & Co.’s trade
secrets for making Kevlar, a high-strength, paraaramid
synthetic fiber that is used for a wide range
of commercial applications such as body armor,
fiber optic cables, and automotive and industrial
products. The defendant was sentenced to pay
$360,000,000 in criminal fines and restitution.
Source: United States v. Kolon,
Case No. 3:12-cr-00137 (E.D. Va)
Beyond the direct economic losses that may result
to businesses and the economy, cyber-enabled trade
secret theft poses a number of additional dangers
and accompanying costs. For example, personally
identifiable information (PII), payment data, and
personal health information (PHI) may be compromised
along with intellectual property assets that are targets
of cyber-enabled espionage. In these circumstances, a
wide range of direct and intangible costs may increase
the overall impact of the cyber incident. These may
include so-called “above the surface” costs—such
as costs associated with technical investigations,
customer breach notifications, post-breach customer
protection, regulatory compliance, public relations,
etc.—to “beneath the surface costs”—such as insurance
premium increases, operational disruptions, damage to
customer relationships, value of lost contract revenue,
increased cost to raise debt, etc. 23
The theft of trade secrets adversely affects entities of
all sizes, including small- and medium-sized enterprises
(SMEs). In fact, SMEs may rely more heavily on trade
secrets than on other forms of intellectual property,
as the costs of obtaining and maintaining a patent,
coupled with the costs of patent litigation, often make it
more financially viable for smaller businesses to depend
primarily on trade secrets. 24
B. THE COMPLEX AND SOPHISTICATED NATURE
OF COMMERCIAL PIRACY, COUNTERFEITING AND
TRADE SECRET THEFT IN THE MODERN ERA.
In addition to understanding the economic impact
of IP theft, effective IP enforcement policy—for the
protection of rights holders and consumers alike—
requires an understanding of the schemes and dayto-day
tactics used by those who unlawfully exploit
copyrighted content, brands, patented inventions,
and trade secrets.
1. Schemes Employed for the Unlawful
Exploitation of Digital Content.
Public reporting offers a window into the various methods
entities employ to unlawfully exploit copyrighted content
such as movies, music, video games, books, and software
in the digital environment to minimize detection and to
generate commercial profit.
SECTION 1
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