Protecting Your Company's Intellectual Property Assets from Cyber-Espionage

By Bressler, Martin S.; Bressler, Inda | Journal of Legal, Ethical and Regulatory Issues, July 1, 2014 | Go to article overview

Protecting Your Company's Intellectual Property Assets from Cyber-Espionage


Bressler, Martin S., Bressler, Inda, Journal of Legal, Ethical and Regulatory Issues


INTRODUCTION

Spying could be as old as the beginning of civilization. We find among the earliest examples of corporate spying dating back to about 300 A.D.. China held a monopoly on silk production for hundreds of years until Nestorian monks smuggled silkworm eggs out of China hidden inside walking sticks (Podszywalow, 2012).

Much later, in the early 1800's, Yankee industrialist Francis Cabot Lowell travelled to Scotland under the guise of ailing health. In fact, Lowell spent months studying the cotton- weaving mills and machinery for which Britain was well-known. The British textile industry replaced hand labor with water-powered looms that performed efficiently and effectively. Even in rural areas of England, the water-powered mills created personal fortunes for the owners as the mills could now be operated with only a handful of skilled workers (Fialka, 1997).

Because this industry and the success of the water-powered mills served as the foundation for the British economy, the British government passed patent protection laws and banned the export of textile-related technology (Fialka, 1997). Factories became virtual fortresses with spikes and broken glass placed strategically along the roof in order to deter spies from breaking in to steal information. In addition, owners swore workers to secrecy so that no information regarding the technology would be leaked to potential competitors. Despite all attempts to protect the textile industry, Lowell memorized the plans for the Cartwright loom while touring factories and brought the stolen technology back to the United States (Rosner, 2001).

Lowell's trip to the United Kingdom not only helped him become even more prosperous, the technology transfer fueled the Industrial Revolution in New England and elsewhere in the United States. By 1999, American Society for Industrial Security/PricewaterhouseCoopers (cited in Fitzpatrick, DiLullo, and Burke, 2004) estimated that 70 percent of U.S. firms' market value existed in intellectual property and trade secrets.

How significant is corporate espionage? Estimates vary significantly as to how big a problem corporate espionage might be. According to the FBI, the cost of corporate espionage appears to be approximately $100 billion per year (Kirby, 2007). As far back as 1999, the Society of Competitive Intelligence Professionals membership began increasing at a rate of 25% per year (New York Times, 1999). For firms that do not have their own competitive intelligence departments, consultants abound. These two actions suggest corporate espionage to be a significant problem facing corporate America.

While competitive intelligence can typically be found an element of many corporate strategies, competitive intelligence does not imply illegal activities. Competitive intelligence can prove a valuable tool in monitoring competitor activities, boosting sales, and making better deals with customers. In fact, a PricewaterhouseCoopers survey of CEO's of fast-growth companies reported that 84% believe competitor information important to their own company's profit growth and 33% also stated that the tough economy is making that even more so (Wellner, 2003).

Often sound competitive intelligence begins with simple steps such as monitoring competitors' websites and scanning industry press releases. Rosner (2001) stated that in many instances, "librarian types" provide good competitive intelligence by searching through publications and market studies. One way that researchers gather competitor information on websites is by examining what jobs the competition seeks to fill, which suggests what technologies you are developing in your Research and Development areas. Johnson (2000) suggested that today, as much as 90-95 percent of information included in espionage reports can be found in the public domain. Could it be that when companies or governments provide too much information to the public, they could be making espionage easier for the spies? …

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