Cyber attacks: "Biggest Transfer of IP in History" Points To China

After eating a rat, one should stay vigilant.
Photo: Tan Fugui

Computer security company McAfee discovered that during a 5 year time span 72 organisation were infiltrated via the internet. Jim Finkle reports for Reuters about what Dmitri Alperovitch, McAfee Lab's vice president of Threat Research calls "the biggest transfer of wealth in terms of intellectual property in history." Read Finkle's article here

Victims of the attacks were between 2006 and 2011:

• USA 49 times
• Canada 4 times
• South Korea 3 times
• Taiwan 3 times
• Japan 2 times
• Switzerland 2 times
• UK 2 times
• Indonesia 2 time
• Vietnam 1 time
• Denmark 1 time
• Singapore 1 time
• Hong Kong 1 time
• Germany 1 time
• India 1 time

Also many international organisations were targeted, including the International Olymic Committee, the World Anti-Doping Agency; and an array of companies, from defense contractors to high-tech enterprises, the computers of the United Nations and the Association of Southeast Asian Nations.

Because of the character of the cyber attacks a state actor is suspected. Mr [James] Lewis, cyber expert with the Center for Strategic and International Studies, was quoted saying: "Everything points to China." read Mr Lewis' report Cybersecurity Two Years Later January 2011. China is one of only countries in the world that enough knowledge in the field of cyber attacks to pull this off. And China is one of the countries that did not fell victim to this RAT (Remote Access Tool) attack.

Read McAfee's White Paper: 'Revealed Operation Shady RAT' (pdf, 14 pages).

UPDATE August 3, 2011:
Also normal citizens are victims of Chinese cyberattacks. Robert Lee of the Korea Herald reports that 35 million social security numbers of Korean civilians float in Chinese cyberspace, because of hacking attacks, read here.

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TGIF: Intellectual Property Enforcement Coordinator Says The Darndest Things

Online copyright piracy is a serious problem. China has started a campaign of three months to blacklist websites with pirated content so that Chinese telecom operators can take them offline. Now one can question the effectiveness of this temporary measure, see here. But there are even worse solutions... Look at the idea of Brad Sherman, U.S. democratic representative, which goes.. let's say a bridge too far. Doug Palmer reported for Reuters that Sherman said the U.S. government should use cyber-combat techniques to take down internet sites in China, Russia and other countries that sell pirated U.S. music and movies. Of course the US could take Chinese websites offline if they are based on servers in the US, subject to US laws. But if the servers are in China, this would be obviously a violation of China's sovereignty and could be answered with similar cyber-combat strikes at US websites based on US servers.

Incredibly, Victoria Espinel, the US White House Intellectual Property Enforcement Coordinator responded allegedly, according to Palmer's Reuters article: "That is something we're actively investigating." And then Espinel allegedly continued: "But while it is technically possible, it does not take long for the sites to pop up in new locations." Was she seriously considering this or just like a thought experiment? Read more here.

The same article is a nice follow-up on the misguided use of hyperboles when one only wants to say that the level of IPR enforcement in China is unacceptably low. Sir Arthur Bamford called it "cancer", see here, and William Delahunt is taking the hyperbole one step further and calls China's low IPR enforcement "economic terrorism". These words are probably not conducive to solving the IPR enforcement challenge in China.

One might better use arguments for protection and enforcement of IPR in China (regardless whether these are in the hands of domestic or international companies/persons) that show China's advantages, based on David Ricardo's theory of comparative advantage, and disadvantage if it engages in mercantilistic policies. This is hard, now that China's economy is so successful and the importance of its domestic market is growing. Ms Espinel, and many international IPR holders are facing a daunting task to protect and enforce IPR in China.

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Chinese Counterfeit Cisco Products Because of Profit Seeking Or State Sponsored Cyber Terrorism?

After 'Cisco Raider/Operation Network Raider' about counterfeit Cisco Systems router products which originate from China, Professor Peter Navarro poses the question whether the intention was only profit seeking by unscrupulous Chinese counterfeiters, or whether these products are trojan horses that are designed to make the US defense more vulnerable to state sponsored cyberterrorism. Professor Navarro (University of California-Irvine) is the author of 'The Coming China Wars'.

Professor Navarro lashes out against China's alleged mercantilist trade practices in 2008, see here.

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IPR/Espionage Ping-Pong Case: Fiat Sues Great Wall, Great Wall Sues Fiat

Fiat sued Great Wall, because it alleges that the Great Wall Peri infringes the intellectal property rights of the FIAT Panda. After this Great Wall sued FIAT at the Shijiazhuang People's Court, based on "evidence" provided by FIAT to the court that they made photo's of production facilities.

Fiat suspected Great Wall to have infringed its Panda's IPRs (ping), so it made photo's of Great Wall Peri's production facilities, so Great Wall sued Fiat for espionage (pong). Is this how it went? Is this how it continues? Ping-pong, ping-pong.

Read the China Briefing article here, or at the Financial Times, via the site of Autonews Gasgoo, here.

Comment of the week:
IP Dragon's friend Richard Osinga (writer and digital entrepreneur) wrote: "I guess the Chinese don't like it if an Italian car manufacturer calls its model Panda."

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USCC 2008 Report to Congress: From Visible IPR Infringements To Undectable Cyber Espionage

The US-China Economic and Security Review Commission came up with their 2008 Report to Congress. The conclusion includes:

• "China continues to violate its WTO commitments to avoid trade distorting measures. Among the trade-related situations in China that are counter to those commitments are restricted market access for foreign financial news services, books, films and other media; weak intellectual property protection; sustained use of domestic and export subsidies; lack of transparency in regulatory processes; continued emphasis on implementing policies that protect and promote domestic industries to the disadvantage of foreign competition; import barriers and export preferences; and limitations on foreign investment or ownership in certain sectors of the economy."
• "China has an active cyber espionage program. Since China’s current cyber operations capability is so advanced, it can engage informs of cyber warfare so sophisticated that the United States maybe unable to counteract or even detect the efforts."

So it's all about intellectual property rights violated, noticed or unnoticed. Read the 405 page report here.

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