Today’s global economies are built primarily on ideas. When you hear that we are living in the information age or we live in an economy of ideas, what you’re really being told is that we no longer build wealth based on the manufacture of physical goods or the possession of commodities or resources, but by creating and marketing ideas.
The ideas that are unique inventions or creations critical to a business’s operation or differentiation are intellectual property. In the entertainment industry, copyrighted works drive the economic engine for their creators. Organizations that build software products or manufacture drugs clearly understand that patent protection for their inventions is essential to their business. People in the restaurant business or who trade in chemical formulas understand that trade secrets are at the core of their business.
These types of information are intellectual property, and they are essential to sustaining your competitive advantage.
What Are Your Options for Protecting Intellectual Property?
Two elements are at the core of intellectual property laws: time and exclusivity. The theory is that the inventor of an idea should have certain exclusive rights to profit from that idea for a limited time. This protection is an incentive for innovation. However, it is deemed to be in the public interest to ensure inventions are not exclusive to the inventor forever. Eventually, intellectual property becomes part of the public domain.
Different types of protections are appropriate for different types of intellectual property. Let’s look at the options.
A patent offers a strong level of protection to a product or process, guaranteeing exclusivity for the patent holder for a limited time.
A patent is among the strongest protections available. It protects the holder by preventing a competitor from bringing a similar invention to market. The patent recognizes the significant investments associated with innovation and allows companies enough exclusive time in the market to make those investments profitable.
Patented information is not secret; as soon as a patent is filed, the exact process for building or creating the invention is public knowledge and is no longer sensitive information.
However, in the period before the patent is filed, designs for inventions are extremely sensitive. Any inappropriate disclosure of that sensitive information ahead of filing can be catastrophic and may even cause denial of the patent application, especially if the disclosure is unknown and a significant period of time elapses between the disclosure and the filing. A disclosure of information that jeopardizes the period of exclusivity is very impactful for an organization. For organizations that develop products for government contracts, the consequences are more severe and may include the loss of lucrative contracts, fines, and even imprisonment.
A copyright grants the holder specific, exclusive rights for a long period of time.
Copyrights are generally assigned to creative works such as books, music, and films. In the business world, copyrights are applied to assets such as websites, marketing material, and slide presentations. Because these works are intended to be public, they are not treated as secret. Instead, copyright protects creators by granting them sole and exclusive rights to:
- perform the work
- reproduce the work
- publish the work
- display the work
- create derivatives from the work
Fair-use statutes allow limited use of copyrighted works for reasons such as education or satire, but generally, these five rights are exclusive to the copyright holder unless they are licensed by a third party. Although copyrights do not last forever, they are intended to help creators retain control of their works for their lifetimes and beyond.
Trademarks offer extended, renewable protection to the holder.
Trademarks are similar to copyrights in that they offer exclusivity to the holder, but trademarks (which are applied to elements such as ideas, logos, or product names) are not protected as soon as they are fixed in a tangible form; protection begins when they’re used in commerce. For that reason, trademarks need to be applied before that first commercial use. Unlike patented inventions, trademarks that are exposed before use don’t generally cause significant financial damage to an organization. The value of a trademark is in the protection it gives the owner for preventing someone else from using the term, idea, or work.
Trademarks don’t expire as long as they are renewed. If the owner lets the renewal lapse, the trademark returns to the public domain.
Trade secrets are protected only as long as they remain secret.
Trade secrets are among the most common, most valuable, and least understood types of intellectual property—and are the most vulnerable. It is very difficult to defend your trade secrets if you have not clearly defined what they are. The term “trade secret” covers a wide range of intangible assets from product formulas and recipes, to training methodologies, know how, industrial design, and business processes.
Simply put, if something gives your organization a competitive advantage and it isn’t one of the other types of intellectual property, it is probably a trade secret.
A trade secret can never expire, per se, but historically, companies had no legal remedy if someone stole their secret and started using it. As a result, companies like Coca Cola and Kentucky Fried Chicken have taken extreme measures to protect their secret recipes, including ensuring no one individual ever has access to the entire recipe.
The lack of legal protection changed when the Defend Trade Secrets Act of 2016 was signed into law. DTSA allows an organization to bring a civil case against an organization that uses a misappropriated trade secret provided the owner of the secret can demonstrate that:
- they took reasonable steps to protect the secret
- the entity who used it knew or should have known the trade secret was acquired by improper means
- the person who acquired it did so without express or implied consent from the owning organization
The Defend Trade Secrets Act increases the need for an organization to build a Critical Asset Protection Program to identify trade secrets and put in place the data loss prevention measures needed to protect them.
What Happens When Intellectual Property is Stolen?
Intellectual property theft is more difficult to identify than the theft of regulated data such as personally identifiable information (PII), which is often discovered when it’s sold on the dark web. Most of the time, intellectual property is stolen for a particular entity, and often the entity that benefits is unaware of the serious nature of the crime. For example, an employee might apply for a job at a competitor claiming they have the skills to build a better product. They get the job and take their former employer’s product designs with them to use in building a competing product.
Sometimes the entity that receives the stolen property has directly commissioned the theft. One highly publicized instance was the case of American Semiconductor, which lost nearly $1 billion in enterprise value, cut 700 jobs, and nearly went out of business when an employee sold intellectual property to a Chinese partner.
American Semiconductor likely had all the external protections and anti-malware you could ever want, but they lacked proper mechanisms to monitor their data and how their people interacted with it. It nearly cost them their company.
“Their strategy was to kill us.”
— American Semiconductor CEO Daniel McGahn
What Is Your Intellectual Property Worth?
If you take nothing else from this blog, please remember this: Intellectual Property theft is among the largest threats to your business, and it will not likely happen through an external attack.
I’m often surprised at how many clients don’t understand the crucial role—and true value—of their aggregated trademarks, copyrights, and trade secrets in their business success.
- Could your competitors more effectively compete with your business if they knew how you sold your products and services and understood your entire strategic plan?
- If you sell direct to consumers, how valuable is the ability to establish and convey trust through a trademark?
- How much does your profitability rely on your customer lists or the processes you use to deliver services?
All of your perimeter security technologies and your intrusion-prevention systems will not protect you from an attack performed by or leveraging a person who has valid credentials inside your environment. It is absolutely vital that you monitor your people and your data. However, most organizations place the majority of their emphasis on protecting from the outsider, and think of insider protections as an afterthought. Until we shift this paradigm, attackers will continue to succeed.