FBI REPORTS THEFT OF TECHNOLOGY UP 53%, AG IS A SPECIAL TARGET
Mar. 10, 2016
Des Moines Register reports:
For decades, scientists at Kemin Industries toiled to invent ingredients for food, livestock feed and a host of other products. But increasingly the Des Moines company has focused not only on innovating, but keeping its latest creations out of the hands of thieves.
Kemin has held classes and trained its employees to guard against accidentally sharing protected information with someone who could steal it.
The sales staff has been told to be vigilant in the field and to report anything suspicious, such as competitors improperly using their technology. Manuscripts sent outside the company are checked before publication to ensure sensitive information is not disseminated.
"We watch the marketplace all the time to make sure that people respect our intellectual property rights because we ... work really hard at being sure that we don't trample on someone else's," said Libby Nelson, vice president and general counsel with Kemin. "We know how valuable they are, how expensive it is to develop it."
Theft of intellectual property has long been associated with aerospace, pharmaceuticals, financial institutions, technological gadgets like an iPhone, computer software, clothing and fashion accessories. Even sprinkler heads have been a target.
Between March 2014 and March 2015, the FBI reported a 53 percent increase in all types of economic espionage. And increasingly, agriculture-related companies find their trade secrets are the target of thieves - some of them foreign governments.
"Any company, no matter how big or how small, that has something that sets it apart in an industry sector is a potential target," said Peter Strzok II, section chief of counterespionage at the law enforcement agency.
Kemin said thievery of its information "is not a regular occurrence," but the ingredient maker has reported stolen intellectual property, including the copying of a Kemin-branded bag and, last summer, the replicating of material in one of its patented products.
The firm is not afraid to sue, but the process is expensive and judicial systems outside the United States may be less likely to enforce a patent. This threat has prompted the company to sometimes pause before seeking a patent, which protects the discovery for 20 years but tips off competitors, Nelson said.
"We are certainly wary of notifying the world of our innovations when we come up with something new," she said.
Targeting seed technology
American agriculture is becoming a bigger target as China and other countries look to get their hands on GMO seeds that are more innovative, productive and advanced.
"Every indication is that this is not just limited to ag biotech," said Jay Kesan, a professor at the University of Illinois who studies intellectual property and technology law. "It's where it's high-tech and where it's very R&D-intensive. It's very attractive (to steal) if you can get away with it."
As the cost to develop seeds soars, stealing can be a quick way to catch up - a problem that concerns farmers and agribusiness companies worried about losing their competitive advantage in the global marketplace.
Companies such as Kemin and Monsanto have responded to protect their proprietary information by adding staff and more sophisticated software. Some firms have hired former FBI officials to help.
The reason: Developing a genetically modified seed that increases yield and is resistant to diseases or can withstand herbicide spray is expensive and time-consuming. Thousands of prospective candidates are rejected for every one that makes its way to market.
CropLife International, a trade group representing the plant science industry, estimates it takes about 10 years and more than $250 million to bring a product from discovery to the marketplace.
Monsanto Co. says it spends more than $2.6 million per day on research and development.
The seeds thieves are especially eager to swipe are called inbreds, which are created by breeders when crops such as corn self-pollinate.
Inbreds are valuable because they include the genetic traits of both parents, and are used to develop high-yielding hybrid seeds containing specific traits that are sold to farmers. Inbred seeds act as a key, unlocking the ability to repeatedly copy the hybrid seed.
Charging with espionage
Agriculture theft was thrust into the forefront in 2011 when a DuPont Pioneer field manager caught a Chinese businessman digging around in one of the company's test fields near Tama, Iowa.
Mo Hailong was among those later charged in a plot to steal patented seeds from companies including Pioneer and Monsanto and smuggle them to China, where they could be counterfeited by an agricultural conglomerate.
In January, the Chinese citizen agreed to a deal with prosecutors and pleaded guilty to conspiracy to steal trade secrets. The charge carries a 10-year maximum prison sentence, but prosecutors in the case agreed to recommend five years, according to court documents.
The FBI invoked broader powers in the Foreign Intelligence Surveillance Act, a law used to fight terrorists or government spies that allows it to bypass a traditional search warrant, to gather evidence. The law enforcement agency treats economic espionage and similar trade secret theft as threats to national security.
Another case that gained notoriety occurred in December 2013, when a federal grand jury in Kansas indicted two Chinese scientists following an FBI investigation that uncovered an alleged plot to steal rice from Ventria Bioscience and send it to a research institute in China.
Neil Hamilton, a law professor at Drake University, said American agriculture has long benefited from having a competitive advantage that centers on its ability to produce more on the same amount of land.
To see that position erode because its technology is being stolen can have a ripple effect.
Companies say it reduces their income and leaves them with less money and incentive to create the next popular trait. They also risk losing control of a product that makes them unique and separates them from competitors.
Farmers, in turn, lose out to producers overseas who are producing more and paying less for the seeds from companies that didn't spend as much on research and development. In addition, they may be deprived of the next trait that never gets developed.
"I think this Chinese situation was probably a real wake-up call," Hamilton said. "It's showing that it may be a new day, and if nothing else it illustrates the significance of the value of agriculture production and technology."
Tom McBride, deputy general counsel for intellectual property and licensing with Monsanto, said as technology has improved, groups trying to steal or illegally gain access to its information have turned to increasingly sophisticated methods.
Monsanto, the world's largest seed company and maker of the popular herbicide Roundup, said it has noticed more attempts to gain access to its proprietary data.
McBride said the St. Louis company is spending more time and effort to protect its information, but he confessed there is only so much companies can do.
"You can't put a dome around the business. You can't put a dome around a field. You can't turn off the computers," McBride said. "You can't turn back the clock on what technology provides and the risks it creates, but it remains important."
Pioneer has focused more of its attention on not only protecting its seeds and testing fields, but its virtual assets on computers and other electronic devices, said Brad Kurtz, senior research manager at DuPont Pioneer.
"People are always trying to come up with new ways of doing this, and it's a matter of just trying to think ahead of them," he said. "We need to make sure that we're always being diligent, doing all the common sense things well."
Posing risk to farmers
The American Farm Bureau Federation said farmers have not only benefited from genetically modified seeds, but other factors including lots of land, large economies of scale and a supply chain that can produce, preserve and quickly deliver food to consumers.
"We'll certainly keep an eye on (stealing of seed)," said Will Rodger, a spokesman with the nation's largest farm group. "But right now, it's the seed producers that are getting affected much more than farmers."
Kurtz, with Pioneer warned that if theft of intellectual property worsens, it could further harm everyone - from the companies that develop the seed, dealers who sell it and the farmers who plant it on hundreds of millions of acres around the world.
"Apple wouldn't have gone out and developed the iPhone or my (Apple Watch) if everyone could simply go, 'Oh, OK, let's reverse engineer that and sell the exact same product for 50 percent of the price,'" he said.
"You're not going to end up with these new novel inventions that are going to move things forward unless you have the intellectual property protection for that inventor. And without that, you basically get a race to the bottom, who can most quickly knock off the best idea that is out there."