November 29, 2018 | The Wall Street Journal

Where Are the Corporate Patriots?

Regarding China, U.S. companies should step up and do their part to protect national security.
November 29, 2018 | The Wall Street Journal

Where Are the Corporate Patriots?

Regarding China, U.S. companies should step up and do their part to protect national security.

The U.S. military needed a small vessel that could transport troops and equipment from large oceangoing ships onto the beach. It was the late 1930s and Andrew Jackson Higgins, a small-boat builder in New Orleans, thought an adapted design of one of his oil-prospecting boats would do the trick. He won the contract, patented his design, and expanded his Higgins Industries workforce from 75 in 1938 to more than 20,000 in 1943. The “Higgins boat” allowed Allied forces to reach the beaches of Normandy on D-Day. Gen. Dwight D. Eisenhower called Higgins the “man who won the war for us.”

Higgins’s story was one of American ingenuity. But it was also a story about the importance of the American patent system and the security of U.S. intellectual property. What would have happened if the Japanese had stolen Higgins’s boat designs before he could get his product into the hands of the U.S. military? What would have happened if, when he applied for his patent, Japanese government-affiliated entities beat him to the punch by filing for a patent using stolen designs?

Or, what if, during an earlier period of relative peace in Europe, Higgins had decided to sell into the European market but was forced to form a joint venture with German firms, thereby transferring critical technology to a government the U.S. would soon face as a foe?

Eight decades later, intellectual-property theft is happening at a pace that threatens American security and prosperity. State actors, and the companies they own, control or influence, have launched a campaign to siphon critical and emerging American technology. The People’s Republic of China annually steals between $225 billion and $600 billion of U.S. intellectual property.

In 2017 Chinese citizen Kevin Dong Liu was arrested for attempting to steal trade secrets and computer information from Massachusetts-based Medrobotics. The company’s robotics technology, which hadn’t been patented at the time of the theft, may one day become critical for battlefield medicine.

In 2012 an investigation by the House Intelligence Committee found that the Chinese company Huawei “exhibits a pattern of disregard for the intellectual property rights” of other companies. Among other illegal actions, Huawei was stealing the patented computer code created by California-based Cisco, electronically copying it, and inserting it into its own products. Cisco is a major contractor to the Defense Department.

In October the Commerce Department accused Chinese state-owned Fujian Jinhua Integrated Circuit Co. of stealing trade secrets from Micron, a semiconductor manufacturer based in Boise, Idaho. Micron produces as much as a quarter of the world’s dynamic random-access memory integrated circuits, which are used in personal computers, workstations and servers and have important military applications. Last month Commerce barred the sale of any U.S.-origin technology to Jinhua.

The American Chamber of Commerce in China and others have warned that Chinese government authorities often demand disclosure of confidential technological information as a requirement of selling into the Chinese market. More than 20% of American companies operating in China have been asked to transfer technology to Chinese partners in the past three years.

The Trump administration should be commended for making cyber-enabled economic warfare a priority in the U.S. National Security Strategy. The president also deserves plaudits for exposing Beijing’s hidden hand in stealing U.S. technology and intellectual property. But protecting America’s critical technology isn’t a job for government alone. America’s private sector needs to work more closely with government to keep sensitive technology out of the hands of a potentially hostile foreign government.

Too many American companies have been too quick to sell out in exchange for access to the Chinese market. Many have been slow to disclose when they’ve been targeted by Chinese hackers in hope of preventing their stock prices from taking a hit. But these are more than business decisions; they are matters of national security.

Andrew Jackson Higgins’s reward for his hard work and ingenuity was more than financial—he earned the entire nation’s gratitude. Eisenhower paid him tribute in his 1944 Thanksgiving Day address: “Let us thank God for Higgins Industries, management, and labor which has given us the landing boats with which to conduct our campaign.” If America wants to retain its prosperity and freedom, it will need more patriotic businessmen like Higgins.

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Issues:

Cyber