Can Defense Contractors Retaliate Against China for Patent and IP Theft?

News is out almost daily of China and other nations stealing sensitive data in hack attacks and via corporate espionage efforts. Most of the time it is over bank security, utility and industrial information, blueprints and design, and other issues that you might regard as more than nuisance. But what about the growing public outcry that China is stealing America’s greatest defense contractor blueprints for advanced defense and offense weaponry and systems? The big question that looms is what exactly these defense contract firms can do to stop it. Can they sue China? Can they get the military or others to start taking direct actions?

The first thing that the public needs to know is that nations do steal and try to steal each others military and defense secrets all the time. This is common practice and the U.S. does it as well. It used to be cloak and dagger theft, then there was bribery. Now the data is being stolen through corporate intranet intrusions and other forms of hack attacks. If US defense contractors are spending billions and billions each year on R&D, arguably more than just on at least some of the taxpayer’s dime, will they be able to go after China in any meaningful way?

All of these hacks have a real business impact on Lockheed Martin Corp. (NYSE: LMT), L-3 Communications Holdings Inc. (NYSE: LLL), Northrop Grumman Corp. (NYSE: NOC), Raytheon Co. (NYSE: RTN), and likely every other defense contractor firm in America. These companies are collectively spending billions upon billions of dollars in R&D only to have the details of the end product and advanced findings stolen by China. Can you imagine a knock-off Patriot missile? Or what about a knock-off joint strike fighter or stealth bomber?

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China is stealing so much and so openly that it is really hard to imagine what defense contractors will do. For starters, the defense contractors do not want to admit that they have been hacked nor that their secrets have been stolen. They obviously cannot nor would not bother filing suit in China because they would be laughed out of the country on the spot. They also cannot just physically use their advanced weaponry to directly attack facilities building and studying the stolen designs. So what can they do?

At a minimum they can petition all relevant international courts and regulatory bodies to stop any international sales of any products with stolen military technology. Will this work? It seems unlikely but maybe there is the Bob Dole answer: “Depends.” U.S. defense contract companies also have to be operating under the belief that many outside the U.S. could care less about the military secrets of the U.S. being stolen and knocked-off.

Defense contractors could try some crazy class action suit against Chinese defense firms here in America. Even if a judgment were handed in their favor, they have to know there is no way to collect any money. So then that leaves the International Court of Justice or other bodies. Again, it feels like more than just a stretch to expect any positive resolution. Then there is the U.S. International Trade Commission or even the federal courts. Yet again, what good will it do?

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If you want to know what is being ripped off, the answer is simple. If it is advanced or valuable, they are stealing it or are trying to steal it.

The F-35 joint strike fighter has been touted as the most expensive jet fighter system ever made, with details of its advanced systems being stolen. In our own “most expensive systems” projection the total cost was over $325 billion yet that is expected to ultimately cost well over $1 trillion to implement. The advanced Patriot missile system secrets have also been targeted. Another target was the Littoral Combat Ship as a multi-billion close to shore operations effort that has been under controversy over costs.

Another concern was the theft of secrets such as THAAD, the Terminal High Altitude Area Defense, a system for shooting down ballistic missiles. Another missile system was the Aegis ballistic defense missile defense system under the Navy.

Unfortunately, this is one of those crimes that is nearly impossible to crack down upon. The military cannot directly respond, because that would suddenly be war. We also have the conundrum in place that the Chinese want to steal our designs but they have nothing to steal in return. We can’t exactly use their blueprint for how to make labor cheaper domestically. We don’t want their “pollution control” secrets, nor do we want their secrets on how use dangerous chemicals in every day household products.

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As an American I am upset about this. The problem is that all governments (and many companies) use corporate espionage and many methods to extract government or technology secrets. It is a game that has existed since the dawn of civilization and since discoverers started creating grand inventions.

Many nations envious of the United States probably feel the same way that the army using bronze felt against the first army using iron. Those who first figured out that iron was superior knew they would only have that advantage for a limited time. That being said, what can be done to stop this in the day of electronic communications?

Tell us what you think if you have real suggestions or solutions. This is a serious issue, and one day it may matter more than any of care to think about.

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