A Tale of Two Spy Scandals

By Austin Bay

Wednesday, July 17, 2013

Edward Snowden's theatrical exposure of the National Security Agency's PRISM surveillance and data-mining program has understandably dominated recent public discussion of cyberspying, cyberwarfare and the murky, dirty business of espionage.

Given the constitutional concerns involved, PRISM has drawn deserved domestic U.S. scrutiny. However, Snowden's revelation that U.S. intelligence agencies spy on allies as well as enemies rates as no revelation at all. Intelligence services, whether American, Chinese or -- pick a country -- certainly have allies and collaborators. But in the pursuit of accurate national security information, they do not have the luxury of simply trusting friends.

Information must be verified, so national spy agencies not only spy on one another, they monitor the organizations and institutions of even historically reliable allies.

PRISM and NSA programs like it are certainly ripe for abuse, but that holds true for all government agencies tasked with collecting sensitive data. This is why allegations that the Internal Revenue Service hindered and suppressed the political activities of conservative groups in the runup to the 2012 presidential vote must be thoroughly investigated. Unlike the NSA, the IRS possesses domestic coercive power.

But barring new information, PRISM appears to be a fundamentally legitimate security operation with the goal of keeping America safe from attack. Snowden's stolen slides, which several media outlets have published, support the Obama administration's claim that it is a counter-terror initiative that uses meta-data analysis as a tool for identifying possible al-Qaida operatives. Terrorists are a dispersed offensive threat -- deadly, intelligent needles hiding in a complex global haystack. PRISM traces the electronic threads connecting the deadly needles. Now police can take pre-emptive action.

Snowden's sensational accusations have unfortunately obscured another major spy scandal, the Sinovel Wind Group Co. Affair. Sinovel directly involves big league opponents, the U.S. and China, grappling over a mega-issue, protecting the commercial rewards of human creativity. In legalese, human creativity translates as intellectual property (IP) rights.

How to protect, recognize, transfer and pay royalties for the use of IP are critical issues in our global 21st century Information Age economy.

IP theft by industrial espionage is the storm center of the Sinovel scandal. In late June the U.S. Department of Justice charged Sinovel, a Chinese wind turbine maker, with stealing $800 million worth of proprietary commercial property from Massachusetts-based American Semiconductor (AMSC). Sinovel faces fines of $1.6 billion. DOJ also charged two Chinese nationals and a former AMSC employee with IP theft. The charges carry 35 years in prison.

In 2005, Sinovel asked AMSC to help it develop more advanced products. Both companies prospered until March 2011, when Sinovel abruptly broke the contract. AMSC's stock plunged; it laid off half its workforce. But AMSC quickly discovered Sinovel had stolen source code and sold knockoff turbines in the U.S. A bribed AMSC engineer had slipped Sinovel the software. The bribe was part of a plot by Sinovel officers to steal AMSC's secrets and then cut AMSC out of the business. AMSC sued Sinovel.

A U.S. federal prosecutor called the plot "attempted corporate homicide" and said the DOJ charges were filed to protect American commerce.

So far, China refuses to help resolve the case. Conveniently, Snowden's allegations have given China media cover. Everyone spies, Beijing says, and America spies big-time. We spy to keep our nation safe, the U.S. counters. Chinese spies steal private intellectual property to obtain an economic edge, and in the process throw Americans out of work.

In a recent assessment of Chinese industrial espionage, StrategyPage.com noted that Chinese IP theft has become so pervasive and successful that there is a growing international desire to retaliate, but "what form payback will take remains to be seen."