Intellectual property protection: The basics

Your company's intellectual property, whether that's patents, trade secrets or just employee know-how, may be more valuable than its physical assets. This primer covers everything from establishing basic policies and procedures for intellectual property protection.

Intellectual property (IP) is the lifeblood of every organization. It didn’t used to be. As a result, now more than ever, it’s a target, placed squarely in the cross-hairs by various forms of cyber attack. Witness the long list of hacks on Hollywood and the entertainment industry’s IP including “Pirates of the Caribbean” and more recently HBO’s “Game of Thrones.” 

Your company's IP, whether that's patents, trade secrets or just employee know-how, may be more valuable than its physical assets. Security pros must understand the dark forces that are trying to get this information from your company and piece it together in a useful way. Some of these forces come in the guise of "competitive intelligence" researchers who, in theory, are governed by a set of legal and ethical guidelines carefully wrought by the Society of Competitive Intelligence Professionals (SCIP). Others are outright spies hired by competitors, or even foreign governments, who'll stop at nothing, including bribes, thievery, or even a pressure-activated tape recorder hidden in your CEO's chair.

IP protection is a complex duty with aspects that fall under the purview of legal, IT, human resources and other departments. Ultimately a chief security officer (CSO) or risk committee often serves to unify intellectual property protection efforts. With protection from cyber attack now critical, the chief information security officer (CISO) now plays a major role.

This primer covers everything from establishing basic policies to procedures for IP protection.

What is intellectual property?

IP can be anything from a particular manufacturing process to plans for a product launch, a trade secret like 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 World Intellectual Property Organization’s (WIPO’s) formal definition of IP is creations of the mind — inventions, literary and artistic works, symbols, names, images and designs used in commerce. 

IP is divided into two categories: Industrial property includes but is not limited to patents for inventions, trademarks, industrial designs and geographical indications. Copyright covers literary works like novels, poems and plays, films, music and artistic works, for example drawings, paintings, photographs, sculptures, web site pages and architectural design. Rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and broadcasters in their radio and television programs. 

[Related: China's theft of IBM's intellectual property]

For many companies, such as those in the pharmaceutical business, IP is much more valuable than any physical asset. IP theft costs U.S. companies as much as $600 billion a year according to the Theft of Intellectual Property Commission. 

The four legally defined categories of intellectual property for which theft can be prosecuted are: 

Patents grant the legal right to exclude anyone else from manufacturing or marketing your unique tangible things. They can also be registered in foreign countries to help keep international competitors from finding out what your company is doing. Once you hold a patent, others can apply to license your product. Patents can last for 20 years.

Trademarks are names, phrases, sounds or symbols used in association with services or products. A trademark often connects a brand with a level of quality on which companies build a reputation. Trademark protection lasts for 10 years after registration and can be renewed in perpetuity.

Copyright protects written or artistic expressions fixed in a tangible medium — novels, poems, songs or movies. A copyright protects the expression of an idea, but not the idea itself. The owner of a copyrighted work has the right to reproduce it, to make derivative works from it (such as a movie based on a book), or to sell, perform or display the work to the public. You don't need to register your material to hold a copyright, but registration is a prerequisite if you decide to sue for copyright infringement. A copyright lasts for the life of the author plus another 50 years.

Trade secrets can be a formula, pattern, device or compilation of data that grants the user an advantage over competitors is a trade secret. They are covered by state, rather than federal, law. 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.

IP can can simply be an idea as well. If the head of your R&D department has a eureka moment during his morning shower and then applies his new idea at work, that's intellectual property too.

How do you keep intellectual property safe?

If your IP is stolen by ne'er-do-wells, catching them is hard, prosecuting them is harder, and getting the stolen information back — putting the proverbial cat back in its bag — is usually impossible. In this area, a little paranoia is quite helpful, because people really are out to get you. That’s why it’s important for the CSO, CISO, and chief risk officer (CRO) to be involved in protecting IP. Consider these real-life examples.

  • An engineer regularly had lunch with a former boss now working for a rival, and fancied himself a hero for gathering competitive intelligence. The information he was giving up in return caused his employer, formerly the market leader, to lose three major bids in 14 months.
  • Immigrant scientists from Eastern Europe who were working on an American defense got unsolicited invitations from their home countries to speak at seminars or serve as paid consultants. The invitations appealed to them as scientists — they wanted to share information about their work with peers. The countries saw this kind of intelligence gathering as cheaper than research and development.

 The steps below are the minimum you should to top keep your IP safe.

  • Know what you've got. If all employees understand what needs to be protected, they can better understand how to protect it, and from whom to protect it. To do that, CSOs must communicate on an ongoing basis with the executives who oversee intellectual capital. Meet with the CEO, COO and representatives from HR, marketing, sales, legal services, production and R&D at least once a quarter. Corporate leadership must work in concert to adequately protect IP.
  • Prioritize it. CSOs who have been protecting IP for years recommend doing a risk and cost-benefit analysis. Make a map of your company's assets and determine what information, if lost, would hurt your company the most. Then consider which of those assets are most at risk of being stolen. Putting those two factors together should help you figure out where to best spend your protective efforts (and money).
  • Label it. If information is confidential to your company, put a banner or label on it that says so. If your company data is proprietary, put a note to that effect on every log-in screen. This seems trivial, but if you wind up in court trying to prove someone took information they weren't authorized to take, your argument won't stand up if you can't demonstrate that you made it clear that the information was protected.
  • Lock it up. Physical and digital protection is a must. Lock the rooms where sensitive data is stored, whether it's the server farm or the musty paper archive room. Keep track of who has the keys. Use passwords and limit employee access to important databases.
  • Educate employees. Awareness training can be effective for plugging and preventing IP leaks, but only if it's targeted to the information that a specific group of employees needs to guard. When you talk in specific terms about something that engineers or scientists have invested a lot of time in, they're very attentive. As is often the case, humans are often the weakest link in the defensive chain. That's why an IP protection effort that counts on firewalls and copyrights, but doesn't also focus on employee awareness and training, is doomed to fail.
  • Know your tools. A growing variety of software tools are available for tracking documents and other IP stores. Data loss prevention (DLP) tools are now a core component of many security suites. They not only locate sensitive documents, but also keep track of how they are being used and by whom. 
  • Take a big picture view. If someone is scanning the internal network and your intrusion detection system goes off, somebody from IT typically calls the employee who's doing the scanning and tells him to stop. The employee offers a plausible explanation, and that's the end of it. Later, the night watchman sees an employee carrying out protected documents, and his explanation is "Oops...I didn't realize that got into my briefcase." Over time, the human resources group, the audit group, the individual's colleagues, and others all notice isolated incidents, but nobody puts them together and realizes that all these breaches were perpetrated by the same person. This is why communication gaps among infosecurity and corporate security groups can be so harmful. IP protection requires connections and communication between all the corporate functions. The legal department has to play a role in IP protection. So does human resources, IT, R&D, engineering, graphic design and so on.
  • Apply a counter-intelligence mindset. If you were spying on your own company, how would you do it? Thinking through such tactics will lead you to consider protecting phone lists, shredding the papers in the recycling bins, convening an internal council to approve your R&D scientists' publications, or other ideas that may prove worthwhile for your particular business.
  • Think globally. Over the years, France, China, Latin America and the former Soviet Union states have all developed reputations as places where industrial espionage is widely accepted, even encouraged, as a way of promoting the country's economy. Many other countries are worse. 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. In 2016, the Corruption Perceptions Index ranked the following 12 countries as being "perceived as most corrupt": Somalia, South Sudan, North Korea, Syria, Yemen, Sudan, Libya, Afghanistan, Guinea-Bissau, Venezuela, Iraq and Eritrea. 

[Related: The dark web goes corporate]

How IP spies and thieves work

To build solid defenses, consider that anyone seeking your IP will: 

Look for publicly available information 

Leonard Fuld, a competitive intelligence expert, says more damage is done by a company's lax security than by thieves. All of the data that thieves can gather from the examples below tells a competitor what your company is doing. Combined, the right details might help a rival reduce your first-to-market advantage, improve the efficiency of their own manufacturing facility or refocus their research in a profitable direction:

  • Salespeople showing off upcoming products at trade shows
  • Technical organizations describing their R&D facilities in job listings
  • Suppliers bragging about sales on their websites
  • Publicity departments issuing press releases about new patent filings
  • Companies in industries targeted by regulators over-reporting information about manufacturing facilities to the Environmental Protection Agency or OSHA, which can become part of the public record
  • Employees posting comments on Internet bulletin boards

Work the phones

John Nolan, founder of the Phoenix Consulting Group, has some amazing stories of what people will tell him over the phone. People like him are the reason that seemingly benign lists of employee names, titles and phone extensions, or internal newsletters announcing retirements or promotions, should be closely guarded. That's because the more Nolan knows about the person who answers the phone, the better he can work that person for information. "I identify myself and say, 'I'm working on a project, and I'm told you're the smartest person when it comes to yellow marker pens. Is this a good time to talk?'" says Nolan, describing his methods. 

"Fifty out of 100 people are willing to talk to us with just that kind of information." The other 50? They ask what Phoenix Consulting Group is. Nolan replies (and this is true) that Phoenix is a research company working on a project for a client he can't name because of a confidentiality agreement. Fifteen people will then usually hang up, but the other 35 start talking. Not a bad hit rate. 

Nolan starts taking notes that will eventually make their way into two files. The first file is information for his client, and the second is a database of 120,000 past sources, including information about their expertise, how friendly they were, and personal details such as their hobbies or where they went to graduate school. Often business intelligence gatherers use well-practiced tactics for eliciting information without asking for it directly, or by implying that they are someone they aren't. 

This tactic is known as "social engineering." Such scams might also include "pretext" calls from someone pretending to be a student working on a research project, an employee at a conference who needs some paperwork, or a board member's secretary who needs an address list to mail Christmas cards. Most of those calls are not illegal. Lawyers say that while it is against the law to pretend to be someone else, it's not illegal to be dishonest. 

Go into the field

During the technology boom, one early morning flight from Austin to San Jose earned the nickname "the nerd bird." Shuttling businesspeople from one high-tech center to another, that flight and others like it became great places for competitive intelligence professionals to overhear discussions among coworkers or to sneak a peek at a fellow passenger's PowerPoint presentation or financial spreadsheet. 

Any public place where employees go, snoops can also go: airports, coffee shops, restaurants and bars near company offices and factories, and, of course, trade shows. An operative working for the competition might corner one of your researchers after a presentation, or pose as a potential customer to try to get a demo of a new product or learn about pricing from your sales team. That operative might simply take off his name badge before approaching your booth at a trade show. Employees must know not to talk about sensitive business in public places, and how to work with the marketing department to make sure the risks of revealing inside information at a trade show don't outweigh the benefits of drumming up business.

Job interviews are another possible leak. Daring competitors may risk sending one of their own employees to a job interview, or they could hire a competitive intelligence firm to do so. Conversely, a competitor might invite one of your employees in for a job interview with no other purpose than gleaning information about your processes.

Put the pieces together

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 non-disclosure 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 like John Nolan. 

Consider this scenario: Nolan once had a client who wanted him to find out whether any rivals were working on a certain technology. During his research of public records, he came across nine or 10 people who had been publishing papers on this specialized area since they were grad students together. Suddenly, they all stopped writing about the technology. Nolan did some background work and discovered that they had all moved to a certain part of the country to work for the same company. 

None of that constituted a trade secret or even, necessarily, strategic information, but Nolan saw a picture forming. "What that told us was that they had stopped [publishing information about the technology] because they recognized that the technology had gotten to a point where it was probably going to be profitable," Nolan says. Then, by calling the people on the phone, going to meetings where they were speaking on other topics, and asking them afterward about the research they were no longer speaking publicly about, Nolan's firm was able to figure out when the technology would hit the market. This information, he says, gave his client a two-year heads up on the competition's plans. 

Go beyond the gray zones

Other countries may have vastly different ethical and legal guidelines for information gathering. Almost everything we've talked about so far is legal in the United States, or at least arguably so in the hands of a clever lawyer. There's another realm of corporate sleuthing, using bugs, bribes, theft and even extortion that is widely practiced elsewhere. 

In his days as a global security consultant, Bill Boni, vice president information security at T-Mobile USA, saw several things happen that probably wouldn't happen in the U.S. A bank in South America that suspected espionage brought in a security consultancy to sweep the place of bugs. When the loss of information continued, the bank hired a different security team. "They found 27 different devices," Boni recalls. "The whole executive suite was wired for motion and sound. The first team that came in to look for bugs was probably installing them."

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. That's why no single set of guidelines for protecting intellectual property will work everywhere in the world. The CSO's job is to evaluate the risks for every country the company does business in, and act accordingly. Some procedures, such as reminding people to protect their laptops, will always be the same. Certain countries require more precautions. 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.

Use the Internet of Things (IoT)

One of the most vulnerable environments is the health care industry. At many hospitals, each bed may have up to 15 IoT bio-med devices, with potentially half connected to the internet. Hackers are getting wise to the fact that the value of protected health information (PHI) is much more valuable than personally identifiable information (PII). 

Weakness in a hospital network via these IoT devices makes it an easier target than in the past. It becomes critically dangerous to patients if the hacker starts changing drug administration protocols on an IoT internet-connected pump.

Most will agree that IoT manufacturers have rushed their devices to market to fill demand, without thinking about how to secure them. Among the problems: Processors in these devices are too small to house IDS, and few devices can be updated. Manufacturers are working to make devices easy to update or automatically updatable since many consumers don’t bother to perform updates on their own.

That said, most hackers are not geographically close enough to stay within range of the device and target the weakest link, the end-server. Organizations need to develop and implement their own strategies that might include securing end-servers, central servers and wireless access points since they’re most the most likely to be the target for a break-in.

Infiltrate corporate networks undetected and live there for lengthy periods of time

R.P. Eddy, CEO of Ergo a global intelligence firm, says, “I’ve worked on several M&A teams and strongly recommend to my clients that they run an audit on all their IP protections, cyber and otherwise, to see how well-protected [their IP] actually is and if they really own it. If it’s leaked out to China, Russia or a competitor, it will significantly factor into the financials in an acquisition, and not in a good way.” He had zero clients taking him up on the offer until the Verizon/Yahoo acquisition where upwards of 500 million user accounts were compromised by a state-sponsored actor. The deal price had to be restructured due to the credibility hit Yahoo took.

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