IP Theft 101: Common Methods, Impact & Prevention

ip theft

Intellectual property (IP) is the intangible property belonging to a company, such as its designs, creative expressions, inventions, or trade secrets. Intellectual property theft leads to serious financial damage for a company, including decreased business growth and loss of competitive edge.

Sometimes, companies aren’t even aware that their IP has been stolen, making tracking IP theft difficult. Even though it’s a federal crime, only a small percentage of all IP theft cases are reported. IP theft is quite prevalent and extremely costly, up to millions or even billions of dollars.

What is IP Theft?

Intellectual property (IP) theft is the unauthorized use, exploitation, or outright theft of ideas, creative works, trade secrets, and proprietary information otherwise protected under IP laws. IP theft covers a wide range of cases, including trademark violations, copyright infringement, and patent infringement. It can damage individuals, businesses, governmental entities, and overall economic health. All of the substantial time and resources it takes to develop intellectual property can disappear in an instant.

Types of Intellectual Property

Intellectual property theft has become increasingly complex and challenging to defend against as more assets are digitized and accessible online, increasing the number of counterfeit products. Many types of IP theft remain a constant threat, whether in digital or physical forms, including these four major areas:

  • Patents: Patent infringement is a type of IP breach that involves targeting a design blueprint, manufacturing process, or other intelligence that documents the making and selling of a product.
  • Copyrights: As one of the most common forms of IP theft across different industries and sectors, copyright infringement refers to the unauthorized use, distribution, or duplication of a creative work protected by copyright law. This includes pirated software, music, films, books, and other creative works.
  • Trademarks: Intellectual property, such as a trademark, shapes a brand’s identity. Recognizable logos, symbols, names, or phrases legally identify particular goods and services held by the rights holder. Trademarks are protected by IP law and intended to distinguish certain products or services of one company from those of others, making counterfeits and knockoffs more easily found.
  • Trade Secrets: Includes stealing information like product development and manufacturing processes, research protocols, and other strategic intel integral to the business. Trade secret theft is the unauthorized use, disclosure, or acquisition of confidential business information that drives a company’s competitive advantage.

Common Methods of IP Theft

IP theft can happen in a wide variety of ways and is not a victimless crime. While some are more purposeful than others, all can lead to devastating consequences for business owners. Companies and organizations of all sizes, from large global enterprises to small and medium-sized businesses, are vulnerable to IP theft. Understanding the most common hacking scenarios enables you to remain vigilant and protected.

Cyber Espionage

Using various techniques, hackers are known to make their way into company networks, giving them the opportunity for trade secret theft, IP theft, and other business and confidential information on company servers. This is where companies tend to focus most of their intellectual property theft prevention efforts. Hackers use phishing and social engineering techniques to enter servers and steal information, once again highlighting the importance of data loss prevention (DLP) software to detect and prevent unauthorized data exfiltration.

Physical Theft

Intellectual property theft can be a physical crime as well as a digital one. Perpetrators might steal prototypes, devices, or confidential documents directly from the rights holder’s facilities. This could involve breaking in or bribing an insider for access. 

Unauthorized access to research labs, manufacturing plants, or even computer systems can steal valuable trade secrets. Software that monitors where and when employees badge in is one way to help prevent IP theft.

Employee Misconduct

Companies must rely on their employees to keep IP and sensitive information within the company. However, employee misconduct is a major concern when it comes to intellectual property theft.

Disgruntled or opportunistic workers may engage in corporate espionage, selling trade secrets or confidential information to competitors. This can also involve seemingly harmless actions, like forwarding sensitive emails to a personal account. These insider threats, intentional or not, can be just as damaging as a physical break-in. Employee monitoring software is one of the most valuable tools you can deploy to ferret out IP theft before it happens.

Counterfeiting and Piracy

Intellectual property theft is a major issue that encompasses two main forms: counterfeiting and piracy. Counterfeiting involves the creation and sale of fake products that imitate the design or brand of a legitimate product, such as designer handbags and clothing. Counterfeits are often called fake products or knockoffs.

Piracy is the unauthorized distribution of copyrighted material, like music, movies, or software. Both forms of IP theft harm businesses by stealing profits, damaging brand reputation, and can pose safety risks to consumers. Properly deployed, data loss prevention (DLP) software can help detect and block the distribution of protected intellectual property.

The Impact of IP Theft

Companies concerned about their intellectual property being stolen might be less likely to invest in research and development. A company could also seek to cut costs by laying off employees because they are forced to cover the expense of IP theft. This stifles innovation and slows economic growth. Additional concerns include reputational damage and competitive disadvantages due to IP theft.

Financial Losses

The cost of intellectual property theft is enormous and multifaceted, and it impacts the profits of your business, as well as your long-term competitiveness and innovation. You also have to factor in the legal remediation costs. According to the Commission on the Theft of American Intellectual Property, IP theft costs the U.S. economy more than $225 billion in pirated software, counterfeit goods, and theft of trade secrets annually, with some estimates being over half a trillion dollars!

Reputational Damage

When a company’s intellectual property is stolen, it can damage their reputation. Customers might lose trust in the company’s ability to protect its innovations, and this can lead to a loss of sales and market share. The corresponding negative publicity and media coverage means the company name and reputation is tarnished for a longer period of time.

Competitive Disadvantage

IP theft can give competitors an unfair advantage. If a competitor steals a company’s trade secrets or product designs, they can quickly bring similar products to market at a lower cost. This can erode the company’s profits and make it difficult to compete. For example, if a competitor steals the formula for a new drug before it goes to market, they can undercut the original company’s price and capture a larger share of the market.

Preventing IP Theft with DLP & Employee Monitoring Software

Data loss prevention (DLP) software and employee monitoring software can be valuable tools in preventing intellectual property theft. DLP software can monitor the transfer of sensitive data, like trade secrets or product designs, and block suspicious activity. 

Employee monitoring software can help identify unusual employee behavior that might indicate potential violations, such as downloading large amounts of confidential data or emailing it to unauthorized recipients. Use these tools in a way that respects employee privacy and with clear policies in place.

Robust IP Protection Strategies  

One key element is DLP software. DLP acts as a digital security guard, monitoring the transfer of sensitive data and blocking suspicious activity. By establishing clear data classification protocols for trade secrets and leveraging DLP software, companies can significantly reduce the risk of accidental or intentional data leaks.

Using employee monitoring software requires careful consideration of privacy concerns and clear communication with employees. It’s a valuable tool in detecting insider threats by malicious actors. Early discovery of such activity allows for intervention and prevents the theft of valuable IP. You need to implement employee monitoring with clear policies that fosters a culture of trust and open communication within the organization.

Employee Education and Policies

Employee education and clear policies are the cornerstones of a strong IP protection strategy and help prevent insider theft. Regular training sessions should be conducted to educate employees on the importance of IP, different types of intellectual property, and how to identify confidential information. Enforcing non-compete clauses and non-disclosure agreements (NDAs) is crucial. 

NDAs legally bind employees to keep confidential any information they gain access to during their employment. NDAs need to be clear, concise, and enforceable in your jurisdiction. Reasonable non-compete agreements can also be valuable tools, particularly in industries where trade secrets are critical. These agreements restrict employees from working for competitors or starting their own businesses in a similar field for a certain period after leaving the company.

Legal Remedies

In the unfortunate event of intellectual property theft, evidence collected by data loss prevention (DLP) and employee monitoring software is crucial for pursuing legal remedies, including cease-and-desist orders. 

This data can be used to build a strong case against the infringer and should be reported to the National IPR Center, a federal government agency. Data collected by monitoring tools can be used to support litigation and enforcement actions, and demonstrate the extent of the IP theft.

FAQs

What is the evidence of IP theft?

Evidence of IP theft can include data collected by employee monitoring software and data loss prevention tools, which can help build a strong case against the infringer. This evidence can be crucial in pursuing legal remedies, such as cease-and-desist orders, and demonstrating the extent of the theft.

What is an IP theft case?

An IP theft case is when someone unlawfully takes or uses someone else’s intellectual property without permission. This can include stealing patented inventions, copyrighted works, or trade secrets.

How does IP theft occur?

IP theft can occur through various means, such as hacking into computer systems, infiltrating employee emails, or physically stealing confidential documents. It may also involve unauthorized use or disclosure of trade secrets, copyrighted materials, or patented inventions.

How do I prove IP theft?

To prove IP theft, you can gather evidence such as data collected by employee monitoring software and data loss prevention tools. This evidence can be crucial in pursuing legal remedies, showcasing the extent of the theft, and building a strong case against the infringer.

Who investigates IP theft?

The National IPR Center, a federal US government agency, investigates cases of IP theft.

Conclusion

A robust intellectual property protection strategy is crucial for businesses of all sizes. This strategy should encompass a multi-layered approach to safeguard valuable ideas, inventions, and creative works. Intellectual property theft can cripple businesses, leading to lost profits, reputational damage, and stifled innovation.

A thorough IP protection strategy is essential, combining employee education on data handling and confidentiality with technological tools like DLP and employee monitoring software to safeguard sensitive information. By implementing a multi-layered approach, businesses can significantly reduce the risk of IP theft and protect their valuable creations.

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