To All SNS Members:

Since we first identified the issue of state-sponsored theft of crown jewel IP as a threat to inventing companies, countries and the global economy, we have been working hard to bring this issue forward in both international recognition, and national responses.

Last night, for the first time, President Obama announced measures that have a chance to materially change the balance of power between trade secret thieves and their victims. This was done through an Executive Order titled "Blocking the Property of Certain Persons Engaging in Significant Malicious Cyber-Enabled Activities," and it appears to achieve in one action what years of talk have failed to achieve.

Unlike the FBI indictments of five Chinese hackers and the related criticisms at the time ("They will never have to face justice while they stay in China"), this order makes sure there is enough deterrent to go around for everyone involved.

The presidential order is viewable here:

<https://www.whitehouse.gov/the-press-office/2015/04/01/executive-order-blocking-property-certain-persons-engaging-significant-m>

It first identifies those posing a cyber threat to the nation, and then describes the sanctions to be used against them.  It is short and to the point.  Transgressors are listed as anyone - individuals or "entities" - and the sanctions involved are serious. 

The order identifies those subject to penalties as:

"any person determined by the Secretary of the Treasury, in consultation with the Attorney General and the Secretary of State, to be responsible for or complicit in, or to have engaged in, directly or indirectly, cyber-enabled activities originating from, or directed by persons located, in whole or in substantial part, outside the United States that are reasonably likely to result in, or have materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States"

- and then goes on to list four areas of damage for which such individuals will be sanctioned.  Three of these revolve around infrastructure damage or services disruption (from networks to single computers, from the grid to banks); the fourth identifies those "who have the purpose or effect of

"(D) causing a significant misappropriation of funds or economic resources, trade secrets, personal identifiers, or financial information for commercial or competitive advantage or private financial gain"

While the above could be considered a more detailed list of the reasons behind the so-far-ineffective FBI indictments, the next section gives the entire order "teeth," by going after not just the individuals, but also any person or company that assists, benefits, or receives such stolen IP:

Here is the new, wider legal net, which will also affect:

"any person determined by the Secretary of the Treasury, in consultation with the Attorney General and the Secretary of State:

(A) to be responsible for or complicit in, or to have engaged in, the receipt or use for commercial or competitive advantage or private financial gain, or by a commercial entity, outside the United States of trade secrets misappropriated through cyber-enabled means, knowing they have been misappropriated, where the misappropriation of such trade secrets is reasonably likely to result in, or has materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States;

 

(B) to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, any activity described in subsections (a)(i) or (a)(ii)(A) of this section or any person whose property and interests in property are blocked pursuant to this order;

 

(C) to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this order; or

 

(D) to have attempted to engage in any of the activities described in subsections (a)(i) and (a)(ii)(A)-(C) of this section."

What are the sanctions these people and entities will face?  They seem to be broad.

1. Freezing assets.  "All property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person of the following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in."
   
   
2. No help from others.  "the making of donations of the type of articles specified in section 203(b)(2) of IEEPA (50 U.S.C. 1702(b)(2)) by, to, or for the benefit of any person whose property and interests in property are blocked -- are prohibited."
   
   
3. Wider sanctions, less help or cooperation from others: "(a) the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to this order; and

   (b) the receipt of any contribution or provision of funds, goods, or services from any such person."

   
   
4. Barring from US entry. "I hereby find that the unrestricted immigrant and nonimmigrant entry into the United States of aliens determined to meet one or more of the criteria in section 1(a) of this order would be detrimental to the interests of the United States, and I hereby suspend entry into the United States, as immigrants or nonimmigrants, of such persons."
   
   
5. Evaders are also guilty: "Any transaction that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions set forth in this order is prohibited."
   
   
6. And, finally, the clause that makes this an important and powerful change in US, and perhaps global, economics and policy - companies, as well as those who commit the original theft, are affected: "the term 'entity' means a partnership, association, trust, joint venture, corporation, group, subgroup, or other organization"

Since China's InfoMercantilist national business model is predicated upon the state stealing global crown jewel IP, and then turning it over to its favored companies in each of at least 402 named target sectors, this is a meaningful problem.  After all, the US remains China's largest customer for such products and companies. 

SNS members may recall our suggestion, published just a few months ago, for providing a legal solution to this exact problem: blocking any company selling any product using stolen crown jewel IP, from doing business with the U.S.

It would seem that our friends in the White House agree, and have framed a solution which does exactly that: blocking companies receiving stolen crown jewel IP from trading with US firms.  Terrific.

White House Cybersecurity Coordinator Michael Daniel (with whom we have communicated recently and regularly) had this to say about the targets of this action:

"those whose cyber activities - whether directed against our critical infrastructure, our companies, or our citizens - could threaten the national security, economic health, or financial stability of the United States"

And President Obama, quoted this morning in the New York Times, described the problem and solution this way: "Cyberthreats pose one of the most serious economic and national security challenges to the United States, and my administration is pursuing a comprehensive strategy to confront them."

Since the beginning of our research into these issues at SNS, and our subsequent creation of the INVNT/IP Global Consortium (www.invntip.com), we have understood, and internationally evangelized, the fact that cyber theft of these trade secrets is an economic problem, rather than simply a security issue.  In fact, we now believe that it is the driving force behind a huge fraction of China's national economic growth.

For all of the above reasons, we applaud the president's actions yesterday, and welcome what may be a new era of moving from passive victimization in a global conflict over innovation creation vs. theft, into a new mode of taking decisive and meaningful actions against those who steal the world's most important assets.

I would like to thank all of our corporate members in the INVNT/IP Global Consortium, as well as the members of the INVNT/IP Government Network, for their work, and continued support, in reducing this threat to global economic growth and national security. Those who wish to join us in this work are encouraged to email me directly, at mark@stratnews.com.  

Sincerely,

Mark Anderson
CEO