The Attack on America’s Intellectual Property Espionage after the Cold War by S. Eugene Poteat, South Carolina Gamma ’57 NGINEERING STUDENTS about to graduate stolen plans and blueprints. Back home, Lowell built his naturally have a tough time concentrating on their first textile plant in Waltham, and America was well on its final exams. No wonder, they are often preoccu- way into the industrial revolution. pied with dreams of that exciting new job, inno- Our founding fathers were more than right. Now, more evating, filing their first patent application, and of than two centuries later, America is the world’s strongest the wealth and good life that can come from innovation and economic and sole military superpower, principally because the fruits of their own labor. New engineers need to be re- of the strength of its economy, and it has 10 times more minded that within the very first year after the birth of intellectual property than the rest of the industrialized our new nation, the Congress passed the laws that estab- world combined. Since the collapse of the Soviet Union and lished our patent system and set up the U.S. Patent Office. the end of the Cold War, the power of a nation is again By this action, the Congress was making it clear that a vi- judged more by the strength of able patent system and the protection of individual’s intel- its economy than by its military lectual property were the key to the new nation’s future power. At the same time, there economic health and wealth. The President, the Secretary Ours was the has also been a shift from classi- of State, the Attorney General, and the Secretary of War first nation in cal espionage, which targeted na- all signed the early patents. The implications here were that tions’ military technology, plans, ownership and protection of an individual’s intellectual prop- which the and intentions, to economic espio- erty—and the right to profit from it—are civil rights, the individual had nage, targeting others’ economic theft of intellectual property was prosecutable and could and commercial research and de- affect international relations, and we were willing to fight certain inalien- velopment and intellectual prop- over foreign infringement. Alexander Hamilton would be able rights, erty. The United States, as the the driver who set up the national banking system that the world’s strongest economy and new corporate system needed to turn patents into profits— based on recog- also the most technically ad- another key to a strong economy. nition of the vanced, is the center of the Our upstart young nation was known throughout the world’s research and develop- world at the time as the “great experiment,” and the rest existence of a ment and, therefore, the princi- of the world waited for the inevitable failure of the experi- Natural Law—a pal target of this new wave of eco- ment. Ours was the first nation in which the individual had nomic espionage. Since the end of certain inalienable rights, based on recognition of the ex- law higher than the Cold War, however, there has istence of a Natural Law—a law higher than any that could any that could been a virtual feeding frenzy of be established by any other authority—through which citi- economic and industrial espio- zens could choose their own leaders and expect human be established nage by other nations—both rights and economic justice. Our long-standing patent laws, by any other friend and foe alike—to steal which have served us well, have recently been changed— authority . America’s trade secrets and intel- and in radical, questionable ways. lectual property for economic and competitive advantage. While INDUSTRIAL ESPIONAGE classical wartime espionage between adversaries was ac- Espionage, or spying on one’s enemies, also known as the cepted as necessary for a nation’s defense, peacetime eco- world’s second-oldest profession, has been around since the nomic espionage is coming to be viewed as ordinary theft dawn of time. Spying on one’s friends or competitors, how- of intellectual property that costs people’s jobs. The mag- ever, usually means industrial espionage. Lowell, MA, is nitude and nature of this espionage is also placing new named after Francis Cabot Lowell, a Harvard graduate and strains on the conduct of diplomacy and statecraft, espe- America’s first premier industrial spy. In 1800, England’s cially among Western nations and former allies. economic crown jewels were its new water-powered Cartwright looms, the engines that powered the world’s COLD WAR ESPIONAGE première textile industry, protected by strong British When looking at the morass and moral and economic deca- patent and export laws and fed by the raw material and dence into which the former Soviet Union seems perma- labor of the Colonies. Using the cover story that he was in nently mired, one cannot help but wonder just what ac- Scotland for his health, Lowell visited several mills nor- counted for its meteoric rise to the largest military power mally closed to visitors, and with his photographic memory, in history. The answer, however, is so simple as to be unbe- was able to skirt British customs inspectors searching for lievable to many Western scholars who for decades had ac 12 WINTER 2001 T HE B ENT OF TAU BETA PI cepted socialism and its variant communism, even with its THE NEW WORLD ORDER unworkable economy, as a legitimate alternative to Western In our global economy, economic competition has replaced democracy and our free enterprise system. The answer is military confrontation in world affairs. America’s intellec- that the Soviet intelligence services successfully stole virtu- tual property and industrial and trade secrets are not only ally all the West’s military and defense technology secrets, the bases of our strong economy and military, but also the thereby saving the time and enormous cost of research and strength of our economic competitiveness. Their loss development. They then spent the bulk of their GNP on build- through economic espionage to foreign governments poses ing and fielding weapons in large inefficient government- a serious threat to the future of our nation. Economic espio- nage is a relatively low-risk enterprise with extremely high owned factories, while ignoring the building of a strong pri- payoffs and few consequences, vate-sector economy to fill the needs and wants of their even when offenders are caught. people. Many of us remember the crowds of Russians queued There is, nonetheless, a widely up during the height of their world-power status to buy their The GRU stole held perception that the end of daily bread from government-owned bakeries. Stalin’s own America’s great- the Cold War means that (except words might best explain the mission of the Soviet Union’s for a few scattered terrorism and intelligence services, the KGB and the GRU (military intelli- est secret of drug problems) we no longer face gence), when he said that he wanted only the secrets locked World War II, a truly serious foreign threat to our national security, and that in the American safes. In carrying out Stalin’s orders, Soviet the atomic intelligence was incredibly successful. Their espionage suc- these past threats have turned into nothing more than normal cesses helped create one of history’s strangest paradoxes, bomb, in economic competition or business the turning of a third-world nation into a superpower that real-time, with as usual. On April 27, 1997, Presi- challenged the West both militarily and technologically for the result dent William J. Clinton stated half a century. The GRU stole America’s greatest secret of that the practice of economic es- World War II, the atomic bomb, in real-time, with the result that Stalin pionage is normal and goes on all that Stalin knew of the bomb’s existence even before Presi- knew of the the time. He then cited the cases dent Truman. The Soviets were then able to duplicate the bomb’s existence of Israel and Greece trying to in- bomb in an incredibly short time without the need for exten- fluence American policy as being sive research, development, and testing. Stalin then went on even before OK—shortly after several other to match and surpass the West in nuclear weaponry, thus President “friendly” countries were caught forcing the West to grant a third-world country world-power engaging in both military and eco- nomic espionage against the U.S. status and recognition—a status the Soviets could never have Truman. The loss of our advanced achieved otherwise. These intelligence victories continued technology to foreign govern- until recent times with the KGB stealing the U.S. Patriot ments through this aggressive anti-missile technology on which the Soviets based their economic espionage means not modern version, the S-300, which it now exports to any buyer only loss of jobs and wealth, but a weakened economic base, for hard currency. loss of political clout, loss of technological superiority, and During the 1970s and 1980s, a Soviet colonel, working un- even disadvantaged armed forces. In former Secretary of dercover for the French intelligence service DGSE, brought State Warren Christopher’s words, “. in the post-Cold out the details of an incredibly successful Soviet intelligence War world, our national security is inseparable from our operation. The Soviet KGB’s “Line X” unit, working mainly economic security.” Safeguarding our sensitive proprietary through the East German STASI intelligence service, had technology and economic information should now receive succeeded in stealing practically every technical secret in the same priority and attention as do our defense and mili- American and NATO arsenals.