US & EUROPE’S Ostrich-like attitude towards Indians takeover of strategic businesses-II How India Steals US Technology?

The 2005 Annual Report to Congress on FECIE reported that 108 countries – both friend and foe – were involved in information collection efforts against the United States.[12] Russia, and India top the list.

The 2005 Annual Report to Congress on FECIE reported that 108 countries – both friend and foe – were involved in information collection efforts against the United States.[12] Russia, and India top the list. The FECIE reports indicate that foreign collectors tend to target dual-use technology, which can be used for both peaceful and military objectives, and military technology. There is no dispute that foreign governments go after trade secrets for the sake of national security advantage. But what is the United States government’s role in company v. company warfare? Should investigations be considered a counterintelligence or law enforcement matter? Do these old jurisdictional boundaries and responsibilities still work? What should be a secret, and what is the government’s role in making that determination? What can be done to protect US interests?


How India Steals US Technology?

The National Counterintelligence Center (NACIC) later became the Office of the National Counterintelligence Executive (ONCIX). In 2004, the ONCIX reported to Congress that

  • “… a recent private US survey indicated that more than half of the impacted firms do not report the breach for fear of reducing shareholder value. As a result, no one is certain how much technology and sensitive proprietary information are lost annually to cyber theft.”
  • “During FY2004, the US Department of Immigrations and Customs Enforcement (ICE) conducted more than 2,500 export investigations involving violations of the Arms Export Control Act, International Traffic in Arms Regulations (ITAR), Export Administration Regulations (EAR), Inter national Emergency Economic Powers Act, and the Trading With the Enemy Act. These investigations resulted in 146 arrests, 97 criminal indictments, and 79 criminal convictions.”

Early reports from NACIC/ONCIX blanked out the names of countries suspected or known to be engaging in foreign industrial espionage against the USA; however, later editions began publishing lists. The countries mentioned in early reports were Algeria, Armenia, Azerbaijan, Belarus, China,Cuba, Georgia, India, Iran, Iraq, Israel, Kazakhstan, Kyrgyzstan, Libya, Moldova,  Russia, Syria, Taiwan, Turkmenistan, Ukraine, and Uzbekistan.

In the 2000 Annual Report, respondents to the NACIC survey of a few (about a dozen) Fortune 500 companies reported that the top countries involved in industrial espionage cases involving their firms were (in order of importance) Japan, Israel, France, Korea, Taiwan, and India.

By 2002, the ONCIX Annual Report commented, “The laundry list of countries seeking US technologies in 2001 was long and diverse. Some 75 countries were involved in one or more suspicious incidents. The most active countries in economic espionage, according to DSS data, were an interesting mix of rich and poor and “friend” and foe. Many of the richest nations aggressively sought the latest in advanced technologies both to upgrade their already formidable military infrastructures—particularly command, control, and communications—and to make their already sophisticated industries even more competitive with the United States. Most of the poorer countries, however, continued to exhibit a preference for older ‘off the shelf’ hardware and software to renovate their existing defensive systems and to develop countermeasures to provide them battlefield advantage. The search for lower technology goods by these less developed countries probably reflected their desire to bring in technologies that could be more easily integrated into their existing military structures; a number of these countries were probably not capable of utilizing the most sophisticated US technologies.”

Major Article on US Intellectual Property Theft By India in Computerworld (Reference)

Source code stolen from U.S. software company in India

Jolly Technologies blamed an insider for the theft

By John Ribeiro in Computerworld
August 5, 2004 12:00 PM ET

IDG News Service – Jolly Technologies, a division of U.S. company Jolly Inc., reported yesterday that an insider at its research and development center in Mumbai stole portions of the source code and confidential design documents relating to one of its key products. As a result, the company has halted all development at the center. 
Jolly Technologies is a vendor of labeling and card software for the printing industry. It set up its R&D facility in Mumbai less than three months ago, according to a statement from the parent company. 
The company said that according to a report obtained from its branch in India, a recently hired software engineer used her Yahoo e-mail account, which now allows 100MB of free storage space, to upload and ship the copied files out of the research facility. The company detected the theft and is trying to prevent the employee from further distributing the source code and other confidential information. 
The vast majority of U.S.-based software companies require their employees to sign an employment agreement that prohibits them from carrying the company’s source code out of a development facility or transferring it in any way. 
Though the Indian branch of Jolly Technologies requires employees to sign a similar employment agreement, the sluggish Indian legal system and the absence of intellectual property laws make it nearly impossible to enforce such agreements, the company said. 
Representatives of San Carlos, Calif.-based Jolly Technologies in Mumbai are working closely with local law enforcement authorities, seeking their assistance in taking corrective action against the employee and to prevent such crimes from occurring again. 
The company said it has decided to delay further recruitment and halt development activities in India until better legal safeguards are in place.

BY ACQUISITION OF US COMPANIES

Indian companies step up acquisition of US tech firms

Premium content from Silicon Valley / San Jose Business Journal by Justin Moresco

Attorney Michael Ioannou traveled to Bangalore, India, in April 2007 to speak at the Confederation of Indian Industry, a national chamber of commerce. Ioannou had spoken to the confederation before, but this time the members had a special request: they wanted him to talk exclusively about Indian companies buying United States businesses.

“That’s a good indication of what’s going on,” said Ioannou, managing partner of the San Jose office of law firm Ropers Majeski Kohn & Bentley PC.

Ioannou represents 20 Indian companies focused on information technology services that are doing business in the U.S. At least half of them are looking to buy American companies.

Ioannou’s experience with India’s business expansion abroad isn’t unusual. Spurred by strong economic growth in India, a weakening U.S. dollar and the desire to grow globally, Indian companies increasingly are buying U.S. ones to gain local-market footholds and improve their competitiveness worldwide.

The trend, which started a few years ago and has steadily gained momentum, has been buoyed by loosened restrictions on the flow of capital in and out of India. “They see the U.S. as a major market and a major center of talent,” said Arun Kumar, head of KPMG LLP’s U.S.-India practice that is based in Silicon Valley. “It’s the same reason U.S. companies have been going to India.”

KPMG’s U.S.-India practice, which offers audit, tax and advisory services to Indian and U.S. companies with mutual investment interests, has seen its revenue double in the past year, Kumar said. Most of that growth has been from Indian businesses looking to move into the American market.

There were 93 acquisitions of U.S. companies by Indian businesses in 2007, up from just six in 2003, according to Mergermarket Ltd. and Virtus Global Partners. About 46 percent of deals since 2001 were for IT services companies. The second-largest sector — medical, including pharmaceutical and biotech companies — accounted for 9 percent of deals.

HCL Technologies, an Indian IT services company with its U.S. subsidiary based in Sunnyvale, is an example of this trend. HCL announced in February it was buying Seattle-based Capital Stream Inc. The U.S. business provides lending automation solutions to banks and finance companies. HCL bought the company for $40 million.

And in the past three years, Indian industrial conglomerate Mahindra Group bought a majority stake in Milpitas-based Bristlecone Ltd., a supply-chain consulting company, and Indian IT company Larsen & Toubro Infotech Ltd. bought San Jose-based GDA Technologies Inc., an electronic design services company. “They’re looking at complementary U.S.-based business,” Ioannou said. “It’s easier to differentiate yourself as an India service provider if you have services already being used by U.S. companies.”

But it’s not just U.S. companies being gobbled up. Last year, India’s Tata Steel Ltd. bought Britain’s Corus Group PLC in a multibillion-dollar deal and became the world’s fifth-largest steel company.

Kumar, who expects the trend to grow in the near future, said small and mid-sized IT services companies in Silicon Valley with “distinctive domain knowledge and customer relationships” will be the most likely targets for Indian businesses on the hunt. He also said there has been activity in the pharmaceutical industry.

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