At the Mobile Breakfast Series in Seattle, Washington, last week, Mark R. Anderson announced the creation of a new alliance to protect intellectual property:  The Intellectual Property Protection Alliance.  The Alliance is so new that Mark was not willing to disclose details about the Alliance and how it works.  He did talk to me about why forming the Alliance is essential.  Mark R. Anderson is the CEO of Strategic News Service (SNS).  SNS describes itself as “the most accurate predictive newsletter covering the computing and communications industries.”  Its readers include Bill Gates, Michael Dell, Marc Andreessen, Gil Amelio and many other industry insiders and influentials. 

The Problem.  The source of the problem is China’s modern mercantilist economic model.  The basic tenets of this model, as set out in an article called What is China? on the SNS blog, A Bright Fire, are:

• Steal Intellectual Property.
• Use Slave Labor Rates to Become the Low-Cost Producer of All Goods and Services.
• Sell Stolen IP Back as Global Exports.
• Industrial Policy:  Subsidize Key Industries.
• Prevent (of Restrict) Unwanted Imports.
• Use Currency Manipulation.
• Price for Export, Suppress Domestic Consumption.
• Create the Appearance of Free and Fair Trade, Without the Fact.
• Encourage Foreign Direct Investment – But Don’t Allow Controlling Ownership.

Anderson argues that the theft of crown jewel intellectual property (IP), e.g., nuclear warhead design, airplane wing fabrication, rocket design, high-speed router design, computer chip design, is an intrinsic part of the Chinese government industrial policy.  This IP transfer is practically the sole reason for China’s economic growth, particularly when compared to the growth of other Asian countries.  If the IP theft stops, China’s economic model breaks.

This transfer of IP from the U.S. and other western countries to China represents the greatest transfer of wealth in human history.  The problem is getting continually worse, but most U.S. citizens aren’t paying attention to it.  The bulk of the IP transfer initially resulted from the forced disclosure by the Chinese government of IP from foreign companies who wanted to do business in China.  However, cyber attacks and the theft of IP from U.S. computer networks increasingly contribute to the IP transfer.  This IP transfer is already affecting the U.S. economy.  People who are talking about jobs and economic activity should look at this issue.  It’s a parasitic drag on countries that invent things.  Anderson does not see China as a country with an independent ability to invent.  For example, he indicated that China’s high speed trains resulted from IP that was stolen and rebranded as China’s own.

The extent of the Chinese cyber attack problem is also described in China-Based Hacking of 760 Companies, a Bloomberg Businessweek article by Michael Riley and John Walcott.

Finding a Solution.  The Intellectual Property Protection Alliance (IPPA) is being created to address this IP theft problem.  IPPA's members will determine what to do about the problem.  IPPA members will initially be corporations and government agencies.  IPPA currently is not structured for participation by individuals, but it is open to ideas on how individuals can be involved.  IPPA will need the help of individuals in moving from strategies to tactics.  Anderson hopes to have a website up soon where individuals can go to get information on how they can help.

Anderson does not see abandoning the laissez-fair culture of the Internet as a way to address the problem.  He thinks it’s like “biting the apple” – when do you stop?  He doesn’t believe in controlling the Internet.  The Internet should be made secure, which he agrees is impossible.  Anderson described securing computer networks connected to the Internet as a “radar trap race.”  He thinks the key is for CEOs to revalue and prioritize their IP assets and develop security around the value and prioritization of the IP.  The ultimate security is not plugging into the Internet.  Information about crown jewel IP assets can be kept on computer systems that aren’t connected to the Internet.

Anderson also does not see the Stop Online Piracy Act (SOPA) as a solution to the cyber attack problem.  See my post entitled Stop Online Piracy Act Would Make Major Changes to Existing Law for an explanation of SOPA.  Anderson agrees with the entertainment industry’s desire to put an end to piracy, but does not think the approach of trying to hold intermediaries hostage is the best approach.  He is against harming U.S. Internet champions.  He sees a vast difference between companies like Napster and LimeWire, and Google, a company that is trying to do the right thing.

According to Anderson, there is very little that individual consumers can do to help thwart cyber attacks from China.  He sees CEOs, CIOs, CSOs, similar corporate officers and government officials as the ones who must thwart the cyber attacks.  He also thinks the U.S. should trade with countries and companies known to protect IP. 

I asked Anderson whether he thought the Chinese government was spying on him as a result of his outspoken opinions about China’s bad behavior.  He indicated that he was not naming names, but that there is a correlation between when SNS publishes articles that are critical of China and verbal attacks on SNS and cyber attacks on its servers.

Many thanks to Mark Anderson for taking time out of his busy schedule to discuss this topic with me.