Intellectual property (IP) can be anything from a particular manufacturing process to plans for a product launch, a chemical formula or a list of the countries in which your patents are registered. It may help to think of it as intangible proprietary information.
The formal definition, according to the World Intellectual Property Organization is creations of the mind – inventions, literary and artistic works, symbols, names, images, and designs used in commerce. IP includes but is not limited to proprietary formulas and ideas, inventions (products and processes), industrial designs, and geographic indications of source, as well as literary and artistic works such as novels, films, music, architectural designs and web pages.
Authoritative sources report that each year, intellectual property theft costs U.S. companies about $300 billion.
To protect the secret, a business must prove that it adds value to the company – that it is, in fact, a secret – and that appropriate measures have been taken within the company to safeguard the secret, such as restricting knowledge to a select handful of executives.
In some ways, trade secrets are easy to protect. Stealing them is illegal under the 1996 Economic Espionage Act. Employees usually know that they’re valuable, and nondisclosure agreements may protect your company further.
What’s more complicated is helping employees understand how seemingly innocuous details can be strung together into a bigger picture-, and how a simple company phone list becomes a weapon in the hands of snoops.
Espionage is sometimes sanctioned – or even carried out – by foreign governments, which may view helping local companies keep tabs on foreign rivals as a way to boost the country’s economy. Executives traveling to Pakistan, for example, might need to register under pseudonyms, have their hotel rooms or work spaces swept for bugs, or even have security guards help protect information. Over the years, France, China, Latin America and the former Soviet Union have all developed reputations as places where industrial espionage is widely accepted, even encouraged, as a way of promoting the country’s economy. A good resource for evaluating the threat of doing business in different parts of the world is the Corruption Perceptions Index published each year by Transparency International (and made famous by The Economist).
India is another country of increasing importance to American businesses because of the rapid rise of offshore outsourcing. The prevalence of outsourcing of IT functions introduces some vulnerabilities to companies that may not think of themselves as having a global presence. In legal terms, the most pertinent global standard is the World Trade Organization’s intellectual property add-on, TRIPS (Trade-Related Aspects of Intellectual Property Rights). But TRIPS protections still must be enforced locally, and none of the countries prominent in software outsourcing, including India, have local laws covering theft of trade secrets. Experts say India’s culture is generally more IP-friendly, but the legal status of intellectual property in India is in a state of flux.
Protect important information, such as source code, with passwords and access codes, and make sure that these are not widely available, either in the United States or at the outsourcing location. Look for employee retention figures, find out if competitors do business with the same companies, and if so, ensure that there is no contact between teams.
Regulated industries such as health care and financial services need to keep closer controls over data and software development than, say, packaged goods companies.
Companies that don’t have the resources to take these steps should think twice about what they are putting at risk by offshoring, whether it’s software development or some other function like call centers involving sensitive customer data.
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