Intellectual Property Theft and Protection

Risk Glossary

Many organizations have data loss prevention (DLP) solutions in place to block leakages of sensitive and valuable data. However, these DLP solutions are often focused on protecting the types of data covered by data privacy laws.

The information covered by data protection regulations is not the only type of valuable and sensitive information in an organization's possession.

A company's intellectual property (IP) is a valuable resource that is crucial to its ability to differentiate itself and compete effectively in the marketplace.

What is IP Protection?

An organization's intellectual property is anything that the company has created that differentiates it and makes it more competitive in the marketplace. This not only includes a company's products but also things that may not seem to be "inventions", such as a marketing strategy.

Since the loss of this intellectual property can significantly hurt a company's profitability, it is essential to take steps to secure and protect this IP. IP protection covers all aspects of protecting company inventions from taking advantage of IP rights provided under the law to implementing data protection solutions designed to prevent leakage of sensitive data.

What are the Four Types of IP Rights and IP Protection?

Intellectual property rights are the various ways by which an organization's intellectual property can be protected under the law. These rights can come in four different forms:

  1. Trade Secret: A trade secret is the "secret sauce" that differentiates one company from another. This includes information that is confidential and not intended to be shared outside of the company.
  2. Trademark: A trademark is a symbol or phrase that enables customers to uniquely identify a particular company. This includes logos, company names, and marketing phrases.
  3. Copyright: A copyright protects a "tangible" creation. This includes writings, music, software code, and similar creations.
  4. Patent Protection: A patent protects intellectual property rights for an invention.

Things that can be patented include products, processes, design, and other inventions. A patent makes it illegal for another party to create, sell, or use the invention without the permission of the inventor.

Different types of intellectual property require different levels of protection. For example, a copyright or trademark filing reveals the protected IP. A patent must describe the invention being protected. Once these types of IP rights are filed, they are protected by law, not secrecy.

The same is not true of trade secrets. Trade secrets are protected if the owner makes a "reasonable effort" to prevent a trade secret from being revealed except by improper means (theft, industrial espionage, bribery, etc.). If a trade secret is leaked accidentally, it is no longer protected.

Why is IP Protection Important?

Many types of intellectual property rights are rather fragile. For example, a slight modification to a trademarked or copyrighted work may allow a competitor to use it. If someone can determine a way to "improve" on a patented work, they may be able to patent the improved version.
Other intellectual property may not be eligible for protection under these three IP rights. For example, patents only protect an invention for twenty years. This may be significantly less time than an organization believes that the idea itself could be profitable.

For this reason, many organizations treat their intellectual property as trade secrets. Whether a novel idea for a research and development direction or the basis for next quarter's marketing strategy, this information needs to be kept secret to be protected by law. This is the approach taken by companies like Coca Cola, whose secret recipe has been protected for over 100 years as a trade secret.

Using trade secret law to protect intellectual property makes implementing a trade secret protection program vital for any organization. Trade secret protections only apply if an organization has taken "reasonable" precautions to protect the sensitivity of its intellectual property.

Under the law, if sensitive information is leaked by accident, it is no longer protected and can be used by anyone without penalty. Since 47% of data breaches are caused by human error or system glitches, it is entirely plausible that such an accidental breach could occur.

How Do I Protect My IP?

Protecting intellectual property is necessary but can be complicated. An effective IP protection strategy requires both legal counsel and solutions designed to detect and respond to IP theft. Important considerations for IP protection include:

  1. Protect From the Very Beginning: Intellectual property rights like patents only provide protection after they are filed. Sensitive data relating to unfiled patents must be protected to ensure that leaked data does not result in someone else filing the patent first.
  2. Be Aware of the Rules: Some countries have strict rules about filing for intellectual property rights that can be confusing. For example, a patent must be filed within a year of revealing an invention without an NDA or offering it for sale, and the definition of "first sale" can include fundraising for a company. Failing to follow these rules can leave an organization's intellectual property lacking legal protection.
  3. Put Policies in Place: Defining intellectual property as a trade secret is an essential part of protecting it as one. Anyone with access to confidential data should be operating under a non-disclosure agreement (NDA) that requires them to protect any of the organization's intellectual property in their possession. This is especially true during mergers and acquisitions (M&As) when external organizations have access to a company's intellectual property.
  4. Achieve Complete Data Visibility: Intellectual property rights for trade secrets do not apply if data is leaked or if an outsider can reverse engineer the intellectual property from publicly available data. This means that complete data visibility is essential to ensuring that any data that can be used to reconstruct an organization's trade secrets is not accidentally leaked into the public domain.
  5. Monitor for Risky Behaviors: Trade secrets are only legally protected against attempts to gain access to sensitive data by "improper" means, such as theft, industrial espionage, or bribery. Employee negligence is a leading cause of data breaches, and accidentally leaked data may invalidate a trade secret's protections. For this reason, data access and use should be monitored for behaviors that may result in accidental leakage of sensitive data, such as uploading data to a cloud storage platform.

Learn about common security flaws that leave organizations vulnerable to IP theft

When protecting intellectual property, it is important to know where the risks are. Read the 5 Security Flaws That Leave Corporate Counsel Blindsided by IP Theft to learn more.

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