Nation of thieves: Chinese contractor for Australia’s AMP pleads guilty to stealing data

• The Chinese man was arrested as he tried to board a flight to China
• Financial planning company had noticed suspicious activity on its network

Reuters

A Chinese contractor for Australian financial planner AMP has been charged with stealing the confidential data of 20 of its customers, police and the company said on Thursday.
The man, named by authorities as Yi Zheng, 28, pleaded guilty to the offence in a Sydney court on Thursday, the Australian Associated Press reported.
New South Wales state police said they began investigating the breach after AMP’s cybersecurity staff noticed suspicious activity on the company network in December.
The investigation led them to Yi, who had downloaded 23 identity-related documents belonging to 20 customers and sent them to his personal email account, police said.
Yi was arrested as he tried to board a flight to China on January 17, police said, adding that they seized mobile phones, SIM cards, a laptop and other electronic storage devices from his luggage.
He was charged “with possessing identity info to commit an indictable offence”, police said, without saying what the man planned to do with the customer information.
“Identity information is an extremely valuable commodity on the black market and dark web, and anyone – whether an individual or business – who stores this data needs to ensure it is protected,” New South Wales’ cybercrime unit commander, Detective Superintendent Matt Craft, said in a statement.
An AMP spokeswoman said the data breach involved a small amount of customer information and there was no evidence the data was further compromised.
The company had contacted all affected customers, put extra security controls in place for them and notified the relevant regulators.
Yi’s lawyer did not immediately respond to a request for comment.

Nation of Thieves

Marriott Data Breach Is Traced to Chinese Hackers as U.S. Readies Crackdown on Beijing
By David E. Sanger, Nicole Perlroth, Glenn Thrush and Alan Rappeport

A Chinese ship near Los Angeles. On Tuesday, President Trump said the United States and China were having “very productive conversations” on trade.

WASHINGTON — The cyberattack on the Marriott hotel chain that collected personal details of roughly 500 million guests was part of a Chinese intelligence-gathering effort that also hacked health insurers and the security clearance files of millions more Americans, according to two people briefed on the investigation.
The hackers, they said, are working on behalf of the Ministry of State Security, the country’s Communist-controlled civilian spy agency. 

The discovery comes as the Trump administration is planning actions targeting China’s trade, cyber and economic policies, perhaps within days.
Those moves include indictments against Chinese hackers working for the intelligence services and the military, according to four government officials who spoke on the condition of anonymity. 

The Trump administration also plans to declassify intelligence reports to reveal Chinese efforts dating to at least 2014 to build a database containing names of executives and American government officials with security clearances.
Other options include an executive order intended to make it harder for Chinese companies to obtain critical components for telecommunications equipment, a senior American official with knowledge of the plans said.
The moves stem from a growing concern within the administration that the 90-day trade truce negotiated two weeks ago by President Trump and Xi Jinping in Buenos Aires might do little to change China’s behavior — including the coercion of American companies to hand over valuable technology if they seek to enter the Chinese market, as well as the theft of industrial secrets on behalf of state-owned companies.
The hacking of Marriott’s Starwood chain, which was discovered only in September and revealed late last month, is not expected to be part of the coming indictments. 

But two of the government officials said that it has added urgency to the administration’s crackdown, given that Marriott is the top hotel provider for American government and military personnel.
It also is a prime example of what has vexed the Trump administration as China has reverted over the past 18 months to the kind of intrusions into American companies and government agencies that Barack Obama thought he had ended in 2015 in an agreement with Chinese Xi.
Trade negotiators on both sides of the Pacific have been working on an agreement under which China would commit to purchasing $1.2 trillion more of American goods and services over the next several years, and would address intellectual property concerns.
Trump said Tuesday that the United States and China were having “very productive conversations” as top American and Chinese officials held their first talks via telephone since the two countries agreed to a truce on Dec. 1.
But while top administration officials insist that the trade talks are proceeding on a separate track, the broader crackdown on China could undermine Mr. Trump’s ability to reach an agreement with Xi.

Another obstacle is the targeting of high-profile technology executives, like Meng Wanzhou, the chief financial officer of the communications giant Huawei and daughter of its founder.
The arrest of Meng, who has been detained in Canada on suspicion of fraud involving violations of United States sanctions against Iran, has angered China. 

She was granted bail of 10 million Canadian dollars, or $7.5 million, while awaiting extradition to the United States, a Canadian judge ruled on Tuesday.
Trump, in an interview on Tuesday with Reuters, said that he would consider intervening in the Huawei case if it would help serve national security and help get a trade deal done with China. 

Such a move would essentially pit Trump against his own Justice Department, which coordinated with Canada to arrest Meng as she changed planes in Vancouver, British Columbia.
“If I think it’s good for what will be certainly the largest trade deal ever made — which is a very important thing — what’s good for national security — I would certainly intervene if I thought it was necessary,” Trump said.
American business leaders have been bracing for retaliation from China, which has demanded the immediate release of Meng and accused both the United States and Canada of violating her rights.
On Tuesday, the International Crisis Group said that one of its employees, a former Canadian diplomat, had been detained in China. 

The disappearance of the former diplomat, Michael Kovrig, could further inflame tensions between China and Canada.
“We are doing everything possible to secure additional information on Michael’s whereabouts, as well as his prompt and safe release,” the group said in a statement on its website.
From the first revelation that the Marriott chain’s computer systems had been breached, there was widespread suspicion in both Washington and among cybersecurity firms that the hacking was not a matter of commercial espionage, but part of a much broader spy campaign to amass Americans’ personal data.
While American intelligence agencies have not reached a final assessment of who performed the hacking, a range of firms brought in to assess the damage quickly saw computer code and patterns familiar to operations by Chinese actors.
The Marriott database contains not only credit card information but passport data. 

Lisa Monaco, a former homeland security adviser under Obama, noted last week at a conference that passport information would be particularly valuable in tracking who is crossing borders and what they look like, among other key data.
But officials on Tuesday said it was only part of an aggressive operation whose centerpiece was the 2014 hacking into the Office of Personnel Management. 

At the time, the government bureau loosely guarded the detailed forms that Americans fill out to get security clearances — forms that contain financial data; information about spouses, children and past romantic relationships; and any meetings with foreigners.
Such information is exactly what the Chinese use to root out spies, recruit intelligence agents and build a rich repository of Americans’ personal data for future targeting. 

With those details and more that were stolen from insurers like Anthem, the Marriott data adds another critical element to the intelligence profile: travel habits.
James A. Lewis, a cybersecurity expert at the Center for Strategic Studies in Washington, said the Chinese have collected “huge pots of data” to feed a Ministry of State Security database seeking to identify American spies — and the Chinese people talking to them.
“Big data is the new wave for counterintelligence,” Mr. Lewis said.
“It’s big-data hoovering,” said Dmitri Alperovitch, the chief technology officer at CrowdStrike, who first highlighted Chinese hacking as a threat researcher in 2011. 

“This data is all going back to a data lake that can be used for counterintelligence, recruiting new assets, anticorruption campaigns or future targeting of individuals or organizations.”
In the Marriott case, Chinese spies stole passport numbers for up to 327 million people — many of whom stayed at Sheraton, Westin and W hotels and at other Starwood-branded properties. 

But Marriott has not said if it would pay to replace those passports, an undertaking that would cost tens of billions of dollars.
Instead, Connie Kim, a Marriott spokeswoman, said the hotel chain would cover the cost of replacement if “fraud has taken place.” 

That means the company would not cover the cost of having exposed private data to the Chinese intelligence agencies if they did not use it to conduct commercial transactions — even though that is a breach of privacy and, perhaps, security.
And even for those guests who did not have passport information on file with the hotels, their phone numbers, birth dates and itineraries remain vulnerable.
That data, Mr. Lewis and others said, can be used to track which Chinese citizens visited the same city, or hotel, as an American intelligence agent who was identified in data taken from the Office of Personnel Management or from American health insurers that document patients’ medical histories and Social Security numbers.
The effort to amass Americans’ personal information so alarmed government officials that in 2016, the Obama administration threatened to block a $14 billion bid by China’s Anbang Insurance Group Co. to acquire Starwood Hotel & Resorts Worldwide, according to one former official familiar with the work of the Committee on Foreign Investments in the United States, a secretive government body that reviews foreign acquisitions.
Ultimately, the failed bid cleared the way later that year for Marriott Hotels to acquire Starwood for $13.6 billion, becoming the world’s largest hotel chain.
As it turned out, it was too late: Starwood’s data had already been stolen by Chinese, though the breach was not discovered until this past summer, and was disclosed by Marriott on Nov. 30.
It is unclear that any kind of trade agreement reached with China by the Trump administration can address this kind of theft.
The Chinese regard intrusions into hotel chain databases as a standard kind of espionage. 

And the Office of Personnel Management hacking was viewed by American intelligence officials with admiration. 

“One thing is very clear to me, and it is that they are not going to stop this,” Mr. Alperovitch said.
Since 2012, analysts at the National Security Agency and its British counterpart, the GCHQ, have watched with growing alarm as sophisticated Chinese hackers, based in Tianjin, began switching targets from companies and government agencies in the defense, energy and aerospace sectors to organizations that housed troves of Americans’ personal information.

Sino-American Peril

GE's Chinese Engineer Stole Power Plant Technology
The spy, who worked at GE since 2008, hid purloined computer files in a photo of a sunset
By Thomas Gryta

An FBI agent escorts Xiaoqing Zheng, an engineer with GE’s Power division, into the federal courthouse in Albany, N.Y., on Wednesday.

A General Electric Co.'s Chinese engineer was arrested and accused of stealing files related to proprietary power-turbine technology, which the FBI says he elaborately concealed to avoid detection.
Xiaoqing Zheng, a U.S. citizen, was hired by GE in 2008 to work in its power division in Schenectady, N.Y., according to an affidavit by a Federal Bureau of Investigation agent filed Wednesday in federal court in Albany, N.Y.
The FBI is conducting a wider inquiry into the theft and use of GE’s trade secrets. 

Agents searched Zheng’s house Wednesday and seized his passport, electronic devices and a handbook that explains “the type of resources the government of China will give to individuals or entities who can provide certain technologies,” according to the affidavit.
To conceal the documents, Zheng on July 5 embedded encrypted files into the code of a seemingly innocuous image of a sunset to send them to a personal email address.

He told FBI agents that he used similar techniques to take GE materials on five to 10 previous occasions, according to the affidavit.
Zheng’s attorney, Kevin Luibrand said his client had not given the GE files to anyone else.
Zheng appeared in court Thursday afternoon and was ordered to post $100,000 bail, which he agreed to do by using equity in his house. 

He was also ordered to restrict his travel and to wear an electronic monitoring device, according to a court filing.
GE said it was aware of the arrest and has been in “close cooperation with the FBI for some time on this matter.” 

The company said it protects and defends its intellectual property with “strict processes in place for identifying these issues and partnering with law enforcement.”
Zheng has degrees from Northwestern Polytechnic University and the Massachusetts Institute of Technology. 

While employed by GE, Zheng owned at least one company in China that is working on technology similar to his work at GE, according to the affidavit. 

GE was aware of his potential business conflicts, the FBI said, and permitted Zheng to remain employed.
Zheng told GE he was the owner of a business called Nanjing Tainyi Aeronautical Technology Ltd. located in Nanjing, China, which he described as a parts supplier for civil aviation engines, according to the complaint. 

The FBI said he was also an owner and general manager of other Chinese firms.
GE declined to comment beyond its statement, citing the continuing investigation.
In 2014, GE’s corporate security learned that Zheng had copied more than 19,000 files from a GE-owned computer to an external storage device.

Zheng told GE security officials in 2014 that he had deleted the files.
In late 2017, GE discovered he had saved about 400 files on his desktop computer using encryption software not used by the company. 

This prompted GE to install software on Zheng’s computer to monitor his activities, leading to the discovery of him sending the confidential files to himself in early July, the FBI said.
“Zheng’s actions (moving the files, renaming them, encrypting them, and hiding them within the binary code of seemingly harmless files) are "uncommon" even among trained computer experts,” the FBI said.

Nation of Thieves

Inside a Heist of American Chip Designs, as China Bids for Tech Power
By Paul Mozur

JINJIANG, China — With a dragnet closing in, engineers at a Taiwanese chip maker holding American secrets did their best to conceal a daring case of corporate espionage.
As the police raided their offices, human resources workers gave the engineers a warning to scramble and get rid of the evidence. 

USB drives, laptops and documents were handed to a lower-level employee, who hid them in her locker. 

Then she walked one engineer’s phone out the front door.
What those devices contained was more valuable than gold or jewels: Designs from an American company, Micron Technology, for microchips that have helped power the global digital revolution. According to the Taiwanese authorities, the designs were bound for China, where they would help a new, $5.7 billion microchip factory the size of several airplane hangers rumble into production.
China has ambitious plans to overhaul its economy and compete head-to-head with the United States and other nations in the technology of tomorrow. 

The heist of the designs two years ago and the raids last year, which were described by Micron in court filings and the police in Taiwan, represent the dark side of that effort — and explain in part why the United States is starting a trade war with China.
A plan known as Made in China 2025 calls for the country to become a global competitor in an array of industries, including semiconductors, robotics and electric vehicles. 

China is spending heavily to both innovate and buy up technology from abroad.
China is veering into intimidation and outright theft to get there. 

And they see Micron, an Idaho company whose memory chips give phones and computers the critical ability to store and quickly retrieve information, as a prime example of that aggression.
Three years ago, Micron spurned a $23 billion takeover offer from a state-controlled Chinese company. 

Today it faces a lawsuit and an investigation in China, which accounts for about half its $20 billion in annual sales.
Then Micron was the target of the heist in Taiwan, according to officials there and a lawsuit the company has brought against the Taiwanese company that employed the engineers, UMC, and the Chinese company it says wanted access to the technology, Fujian Jinhua Integrated Circuit Company.
Other companies may face similar predicaments to Micron.
One state-backed factory in the city of Wuhan, owned by Yangtze Memory Technology Company, or YMTC, will be turning out chips that look similar to those made by Samsung, the South Korean chip maker, said Mark Newman, an analyst at Sanford Bernstein.

Micron memory chips. The chips give phones and computers the critical ability to store and quickly retrieve information.

“The YMTC one is virtually identical to Samsung’s, which makes it pretty clear they’ve been copying,” Mr. Newman said.
A Samsung spokeswoman declined to comment, and YMTC officials did not return calls for comment. 

Earlier this year, Xi Jinping visited YMTC’s production facilities, one way China’s leaders show their endorsement for projects.
China defends Made in China 2025 as necessary for its economic survival. 

It still depends on other countries for crucial goods like chips and software, and China is offering funding for homegrown labs and for entrepreneurs who hope to grab a piece of the future.
But Trump administration officials in a report earlier this year recounted how Chinese officials have at times helped local companies get intellectual property from American firms, including in the energy, electronics, software and avionics sectors.
American business groups worried about Made in China 2025 point to Micron. 

The account of its struggles was based on Taiwanese and American legal documents.
In 2015, representatives from Tsinghua Unigroup, a Chinese chip maker with major state backing, approached Micron with an acquisition offer, which the company rejected. 

It later also turned down several partnership offers from Chinese companies out of concern for protecting its technology, said a person with knowledge of the situation, who asked not to be identified because the person lacked authorization to speak publicly
That was when one Chinese company resorted to theft, Micron said in documents filed last December in the Federal District Court for the Northern District of California.
Micron’s accusations focus on efforts by Fujian Jinhua Integrated Circuit, a state-backed chip maker, to build a $5.7 billion factory in China’s Fujian Province. 

Two years ago, Jinhua tapped UMC, a Taiwanese company, to help it develop technology for the factory. 

Instead of going through the lengthy steps required to design the technology, UMC and Jinhua decided to steal it.
A UMC spokesman denied the allegations and declined to comment further. 

Jinhua did not respond to requests for comment.
First, UMC lured away engineers from Micron’s Taiwan operations with promises of raises and bonuses.

Then, it asked them to bring some of Micron’s secrets with them.

The engineers illegally took with them more than 900 files that contained key specifications and details about Micron’s advanced memory chips.
Micron grew suspicious after discovering one of its departing engineers had turned to Google for instructions on how to wipe a company laptop.

Later, at a recruiting event in the United States aimed at Micron employees, Jinhua and UMC showed PowerPoint slides that used Micron’s internal code names when discussing future chips it would make.
Micron’s campus in Boise, Idaho. The state’s two senators worry that a patent lawsuit brought against the company in China could block Micron from selling some products there.

Alerted by Micron, the Taiwanese police tapped the phone of one Micron engineer, Kenny Wang, who was being recruited by UMC. 

According to an indictment in Taiwan against Wang and others, UMC reached out to Wang in early 2016 using Line, the smartphone messaging app, while he was still working for Micron. 

UMC explained it was having problems developing its memory chip technology. 

Wang then grabbed the information it needed from Micron’s servers, and later used it to help UMC’s design. 

The police said Wang received a promotion at UMC.
When investigators showed up at UMC’s offices early last year, employees rushed to hide what they had taken from Micron. 

Wang and another former Micron employee gave laptops, USB flash drives and documents to an assistant engineer, who locked them in her personal locker. 

She then left the office with Wang’s phone — the one that the police had tapped, which was quickly tracked down.
UMC filed its own criminal complaint against Wang last year, which Taiwanese prosecutors rejected. Wang and other engineers who were charged said they had taken the trade secrets for personal research. 

Wang did not respond to emails and phone calls for comment.
In January, Micron was hit with a patent infringement suit by Jinhua and UMC over several types of memory. 

As part of the suit, the companies requested the court ban Micron from making and selling the products and pay them damages. 

The case is being heard by a court in Fujian Province. 

The Fujian provincial government is an investor in Jinhua.
In a letter sent to President Trump, Senators James Risch and Mike Crapo, Republicans of Idaho, expressed concern about the entire case and specifically the rapid pace with which the patent lawsuit has proceeded. 

The case could block Micron from selling some products in China.
“If the case against Micron moves forward, and the Chinese government once again rules in favor of itself, it would cause substantial damage to Micron and the U.S. tech industry as a whole,” said the letter, which was viewed by The New York Times.
In May, China’s market regulator opened a price-fixing investigation into Micron, along with South Korean memory makers SK Hynix and Samsung Electronics. 

Memory prices have jumped over the past year, because of spiking demand and limited production by the three companies, which dominate the market. 

Another China regulator, which has said it is also monitoring the price jump, also gave a multimillion-dollar grant to Jinhua.
Jinhua and other Chinese chip makers face hurdles in catching up. 

Production of semiconductors involves a highly complex and automated production process that controls everything down to the atomic level.
Jinhua and others are spending big to get there. 

In Jinjiang, a city in Fujian Province once known as a shoe-manufacturing center, Jinhua’s new factory is almost finished. 

Rising five stories and stretching several football fields long, the structure boasts 100,000 square feet of new office space.
Economic planners in Jinjiang said they were hoping to attract more talent from Taiwan. 

In addition to adding more flights there, the town was in the process of building out a bilingual international school, a hospital with international accreditation, and new upscale apartments. 

The new plant is just a short drive from the airport.
“Most of Made in China 2025 is likely to succeed. Not all technologies are rocket science,” said Dan Wang, a technology analyst in Beijing with Gavekal Dragonomics, a research firm. 

“With enough subsidies, Chinese firms have a good shot at catching up to the technological frontier.”

Nation of Thieves

US charges 3 Chinese nationals with hacking, stealing intellectual property from companies
By Evan Perez

The Justice Department on Monday unsealed an indictment against three Chinese nationals in connection with cyberhacks and the theft of intellectual property of three companies, according to US officials briefed on the investigation.
But the Trump administration is stopping short of publicly confronting the Chinese government about its role in the breach. 

The hacks occurred during both the Obama and Trump administrations.
The charges being brought in Pittsburgh allege that the hackers stole intellectual property from several companies, including Trimble, a maker of navigation systems; Siemens, a German technology company with major operations in the US; and Moody's Analytics.
The three charged in the Pittsburgh case are presumed to live in China and are either employed or associated with Guangzhou Bo Yu Information Technology Co., known as Boyusec, court documents say. 

US intelligence and private cybersecurity experts say Boyusec works as a contractor for the Chinese ministry of state security, that nation's version of the National Security Agency. 

The court documents unsealed Monday don't mention the Chinese state links.
US investigators have concluded that the three charged by the US attorney in Pittsburgh were working for a Chinese intelligence contractor, the sources briefed on the investigation say. 

But missing from court documents filed in the case is any explicit mention that the thefts were state-sponsored.
A 2015 deal between then-President Barack Obama and Xi Jinping prohibits the US and China from stealing intellectual property for the purpose of giving advantage to domestic companies.
In recent months US intelligence agencies have concluded that China is breaking the agreement.

But there's debate among intelligence officials about whether there's sufficient evidence to publicly reveal the Chinese government's role in the infractions, these people say.
Obama administration officials had touted the Obama-Xi agreement, as well as 2014 Justice Department charges against members of the Chinese People's Liberation Army for commercial espionage, for "reducing" some of the Chinese cyberactivity against companies in the US.
But the 2015 Obama-Xi deal was met with skepticism inside the US agencies whose job it is to guard against Chinese cyberactivity targeting US companies. 

Some now say there was only a brief drop in the number of cyberspying incidents, if at all.
In the waning months of the Obama administration, intelligence officials briefed senior White House officials on information showing that the Chinese cyberattacks were back to levels previously seen, sources familiar with the matter told CNN. 

Early in the Trump administration, US intelligence officials briefed senior officials, including the President and vice president, as well as advisers Jared Kushner and Steve Bannon.

Nation of Thieves

China’s theft of U.S. trade secrets under scrutiny
By Mara Hvistendahl

Counterfeit drugs seized at John F. Kennedy International Airport in 2012. A new report estimates that counterfeiting, stolen trade secrets, and pirated software cost the United States as much as $600 billion a year.

When it comes to intellectual property (IP) theft, there’s the rest of the world, and then there’s China, a new report says. 

In 2015, mainland China and Hong Kong accounted for 87% of counterfeit goods seized by the U.S. Customs and Border Patrol. 

China’s share of trade secrets theft, though harder to track, is not far behind, claims the Commission on the Theft of American Intellectual Property in Washington, D.C., a bipartisan nongovernmental group co-chaired by former Utah Governor Jon Huntsman Jr., who served as U.S. ambassador to China from 2009 to 2011.
Stolen trade secrets, pirated software, and counterfeiting cost the United States between $225 billion and $600 billion per year, the commission estimates. 

The report singled out as suspect China’s targeting of biotechnology and quantum communications technology. 

“The massive theft of American IP threatens our nation’s security as well as vitality,” said former Director of National Intelligence Admiral Dennis Blair, co-chair of the commission, in a press release.
Scholars often take issue with efforts to put a price tag on IP theft. 

In court, for example, companies frequently cite as losses the amount spent researching a product or idea. 

But by the time a product comes to market, that figure may be a poor reflection of its true value. 

“The industry standard for competitive edge in IP is in some cases just a couple of years,” says Greg Austin, a cybersecurity expert at the EastWest Institute in New York City and author of Cyber Policy in China. 

Also up for debate is how best to address IP theft. 

The Obama administration pursued a strategy heavy on prosecutions of Chinese-born U.S. scientists (see here, here, and here), along with symbolic moves against overseas offenders, such as the 2014 indictment of five members of a People’s Liberation Army hacking unit. 

Policy tools improved under Obama went “largely unused,” the report said. 

For instance, a 2015 law enabling the president to sanction foreign countries, companies, and individuals for IP theft has not yet been invoked.
The commission urges the Trump administration to “make IP theft a core issue.” 

Among the policy prescriptions outlined are expanding the number of green cards available to science students—to discourage Chinese U.S.-educated scientists from returning to their home countries and contributing to their development—and ensuring that “top U.S. officials from all agencies” push China “toward becoming a self-innovating country.”
Derek Scissors, an economist at the American Enterprise Institute in Washington, D.C., who commented on a draft of the report but was not involved with writing it, says those recommendations could have been more targeted: “First, start sanctioning companies that receive stolen IP. Change their risk calculations. When that’s in place, what else is truly required will become clearer.”

Nation of Thieves

Chinese counterfeiters and hackers cost US up to $600 billion a year

By Paul Wiseman

Counterfeit goods, software piracy and the theft of trade secrets cost the American economy as much as $600 billion a year, a private watchdog says.
In a report out Monday, the Commission on the Theft of American Intellectual Property says the annual losses range from about $225 billion to $600 billion. 

The theft of trade secrets alone costs the United States between $180 billion and $540 billion annually. 

Counterfeit goods cost the United States $29 billion to $41 billion annual; pirated software costs an additional $18 billion a year.
The findings echo those of the Office of the Director of National Intelligence, which in 2015 pegged the annual cost of economic espionage by computer hacking at $400 billion.
The commission labels China the world's No. 1 culprit. 

China accounts for 87 percent of counterfeit goods seized entering the United States. 

The report says the Chinese government encourages intellectual property theft.
The commission is led by former Republican presidential candidate and Utah Gov. Jon Huntsman, who also served as U.S. ambassador to China, and Adm. Dennis Blair, a former director of U.S. national intelligence.
"The vast, illicit transfer of American innovation is one of the most significant economic issues impacting U.S. competitiveness that the nation has not fully addressed," Huntsman said. 

"It looks to be, must be, a top priority of the new administration."

Ali Baba and the Chinese Thieves

Trump says one of China’s most notorious thieves of American IP is a “great, great entrepreneur”
By Gwynn Guilford

Making America great again with thieves

Right now, a “Make America Great Again” hat will set you back $25 on the official merchandise site for president Donald Trump. 

Vendors on Taobao—the Chinese online marketplace run by e-commerce giant Alibaba—will sell you one for as little as $0.50.
This is exactly the kind of Chinese intellectual property violation that Trump decried on the campaign trail. 

With good reason, it seems: Two weeks ago, the US government accused put Taobao back on its “Notorious Markets” list for rampant counterfeiting.
But if this came up when the president met with Jack Ma, the head of Alibaba, at Trump Tower earlier today, neither said.
“It was a great meeting,” Trump said in a press conference after the meeting. 

“Jack and I are going to do some great things.” 

He praised Ma as “a great, great entrepreneur, one of the best in the world.”

Instead of counterfeiting, the headline-grabbing topic was Ma’s vow to create 1 million American jobs over the next five years. 

The “Alibaba job boom,” is how Sean Spicer, Trump’s pick for press secretary, dubbed it.
The meeting makes Trump look good—like his much-vaunted negotiation skills forced “China” to come to the table and invest in American prosperity. 

“Yet again, President Donald Trump started another day by creating millions of jobs for Americans,” crowed Townhall, a pro-Trump news site.
But this was already in the making: Ma unveiled a similar-sounding US job-creation plan in June 2015, at an event in New York. 

He claimed at the time that all these new jobs would come from the full-time employment of small businesses—particularly farmers and boutique clothing designers—selling to Chinese customers via Alibaba’s e-commerce platforms.
As for Alibaba, its shares jumped 1% on the news of the Trump meeting. 

Ma’s meeting with Trump also was some free lobbying with the US government, on which the company has spent $2.4 million since 2012 (paywall).
And Alibaba could definitely benefit from a warmer relationship with the US government.
One priority is getting Taobao off the US government’s Notorious Markets list; though the list doesn’t directly penalize companies, it damages their credibility.
There’s also the investigation by US Securities and Exchange Commission into whether Alibaba’s accounting is violating federal laws.

It’s worth noting that Trump’s nominee to head the SEC, Jay Clayton, led Alibaba’s record-breaking $24-billion IPO on NYSE in 2014, as a lawyer at Sullivan & Cromwell LLP representing the IPO’s underwriters.

Nation of Thieves, Land of Copycats

The case of the Scottish wave energy firm Pelamis is the latest to raise questions about China and intellectual property.

By Tania Branigan

Pelamis wave energy equipment in the water at Leith docks in Edinburgh. 

It was once renowned as the home of the four great inventions: paper, gunpowder, printing and the compass. 

These days, China is more often portrayed as a land of copycats, where you can buy a pirated Superdry T-shirt or a HiPhone and where smaller cities boast 7-12 convenience stores, Teabucks outlets and KFG fried chicken shops.

Behind the startling brand infringement on display in markets and shopping streets lies a deeper intellectual property issue. 

Chinese entities have consistently sought to play catch-up by piggy-backing on other people’s technological advances. 

They have pursued software, industrial formulas and processes both through legitimate means – hiring in expertise, buying up startups, tracking publicly available information – and questionable or downright illegal ones: digging genetically modified seeds out of the fields of Iowa so they can be smuggled on a Beijing-bound flight, or paying for details of a specialised process for making a whitening pigment used in Oreos, cosmetics and paper – which sounds like a niche concern until you learn that the titanium dioxide market is worth $12bn a year.
The British carmaker Jaguar Land Rover is suing a Chinese firm for copying its Range Rover Evoque, in the latest of several motor industry cases. 

In the best known, China’s Chery reached an undisclosed settlement with General Motors over cars so similar that the doors were interchangeable. 

That case had one really striking feature: when GM approached Chinese manufacturers detailing the components they would need for the Matiz, they were told that Chery had already ordered identical parts.
This week came the curious case of Pelamis Wave Power, an innovative Scottish company which lost several laptops in a burglary after being visited by a 60-strong Chinese delegation – and then noticed the launch of a strikingly similar project in China a few years later. 

Chinese experts had certainly demonstrated a close interest in the work of Pelamis.

Li Keqiang, now Chinese premier, visits the Pelamis Wave Power factory in 2011. 

Whether engineers had been working along similar lines, were paying close attention to what Pelamis had made public, or somehow obtained information by other means is impossible to say.
What is certain – say western governments, business experts, analysts and security experts – is that Chinese businesses are routinely benefiting from the theft of intellectual property. 

Companies doing business in China are routinely advised to take clean laptops rather than their usual work devices on trips; to ensure that their work is protected with patents and trademarks internationally; and to be careful about the information they hand over to partners or potential manufacturers.
But their greatest vulnerability is operating in the age of the internet. 

In 2012, Keith Alexander, then director of the US National Security Agency, described commercially targeted cyber-attacks as “the greatest transfer of wealth in history”. 

The following year, a commission suggested such intrusions cost the US $300bn a year – with China responsible for up to 80%. 

They range from phishing expeditions to narrowly targeted approaches – and even attacks designed to find out what legal and other means firms are using to challenge earlier thefts.
China is consistent and angry in its denials of state-sanctioned industrial espionage: “The Chinese government does not engage in theft of commercial secrets in any form, nor does it encourage or support Chinese companies to engage in such practices in any way,” Xi Jinping said last year.
Chinese firms – even state-owned ones – are not always acting at the behest of officials, still less in the interests of China per se. 

But security experts have linked commercial incursions to People’s Liberation Army buildings and personnel and Nigel Inkster, formerly of MI6 and author of China’s Cyber Power, observes: “It’s safe to say that there’s been a general policy imperative to catch up with the west technologically, by whatever means.”
Not only are there clear international agreements on intellectual property, there is also vastly more to steal, the internet makes it much easier to do so – and the speed with which breakthroughs are seized upon by others is increasing all the time.

The Chinese intellectual property regime has developed rapidly: Xiaobai Shen, an expert on intellectual property and business at Edinburgh University, says courts could soon be overwhelmed by the number of domestic cases.

But foreign firms and governments still struggle to pursue cases. 

In the titanium dioxide case, an individual was jailed in the US – but prosecutors were unable to serve documents on the Chinese firm concerned.
That has prompted pushback at state level. 

In 2014, the US Justice Department announced it was charging five Chinese military officers with stealing trade secrets. 

Just over a year later, following the threat of sanctions, China signed landmark deals with the US and then the UK, agreeing not to conduct or support hacking and intellectual property theft for commercial gain; it was tacitly understood that old-school nation-state spying was still on the cards.
Those agreements were greeted with scepticism – but Dmitri Alperovitch of the cybersecurity firm CrowdStrike says intrusions on commercial targets in the “Five Eyes” – the intelligence alliance made up of the US and UK, Canada, Australia and New Zealand – have fallen by as much as 90%, with hackers apparently shifting to domestic targets and Russian entities.
“Prior to the agreement, we have seen pretty much every sector of the economy targeted: insurance, technology, finance. They have scaled back,” he says.

Inkster thinks that may mean a focus on different sources, such as human intelligence. 

The agreements are also ambiguous, because of the blurry line between commercial and national security interests when it comes to sectors such as food and energy – with China interpreting national security much more broadly than western nations do.

Nation of Thieves

Chinese man going to prison for stealing US corn seeds, DuPont trade secrets
www.foxnews.com

Corn theft is taken seriously in United States.

A naturalized American citizen originally from China has been sentenced to three years in prison for his part in stealing corn scientifically-enhanced seeds and sending them to a corporation in Beijing.
Businessman Mo Hailong, employed by Beijing’s Kings Nower Seed, worked with five other Chinese nationals to rob trade secrets from a pair of American agricultural heavyweights: Dupont Pioneer and Monsanto.
Working side by side, the team reportedly smuggled around 1,000 pounds of corn seeds to Beijing (some of which were discovered by custom officers hidden in manila envelopes surrounded by boxes of microwaveable popcorn). 

Those samples that made it through customs were sent out to scientists at Beijing Dabeinong Technology Group Co., the parent company of Kings Nower Seed, to be studied and duplicated in the country.
“We need to send a message to China that this kind of criminal behavior is not tolerated in the United States,” said US District Court Judge Stephanie Rose, who presided over the case, on Wednesday when handing over the ruling decision.
But stealing these patented seeds isn't something either of these companies take likely.

And the U.S. government agrees. 

According to the FBI a “parent” or “inbred” seed “constitutes valuable intellectual property of a seed producer.” 

Based on a press release the bureau released related to a seed theft in 2013, “the estimated loss on an inbred line of seed is approximately five to eight years of research and a minimum of 30 to 40 million dollars.”
Monsanto has previously aggressively protected its technology, and has been known to sue farmers who saved seeds from prior plantings for reuse. 

That action violates a contract farmers using Monsanto seeds are required to sign.
Now Hailong, who lived in America for two decades and has a wife and two children who are all U.S. citizens, will likely face deportation when he’s released. 

He’ll also have to pay restitution to Monsanto and Dupont Pioneer for the theft.