There are tangible and intangible costs to having your intellectual property stolen. However, they all lead back to negatively impacting your bottom line. Here’s how this type of fraud can hurt you in the year ahead, and how to stay smart.
Data security firm Cyberhaven notes that IP theft breaks down into four main types:
IP theft can cost in a number of ways. The better companies understand those costs, the more motivated they will be to take the necessary precautions to prevent them.
Also read: 10 Top Android Apps For Personal FinancesThe Commission on the Theft of American Intellectual Property estimates that losses originating from IP theft range from $225 billion to $600 billion per year, or from 1%-5% of the entire U.S. GDP.
Deloitte’s report on the hidden costs of an IP breach notes that 85% of these financial losses stem from lost contract revenues and operational disruptions, although customer breach notifications, PR outreach, regulatory fines, and investigations all carry some of the blame. In the case of lost contracts, perhaps no one understands quite like Massachusetts-based infrastructure company American Superconductor. Their top client illicitly obtained their source code and installed the pirated version on their wind turbines, costing the company $100 million in yearly recurring revenue.
Much of the burden also comes from lost revenue from the physical sale of these IP-rich products. To give a picture of just how much the rightful owners are missing out on, the U.S. Patent and Trademark Office stated that the sale of pirated and counterfeit goods totaled as high as $4.5 trillion annually.
If this was all, it would be bad enough. However, IP theft has a bigger effect on the American economy at large. Intellectual property-intense industries account for 35% of the total U.S. workforce, comprising 56 million jobs. Counterfeiting and piracy cost U.S. businesses upwards of $200 billion a year and no less than 750,000 jobs. That’s not an insignificant price to pay.
Intellectual property law can be one of the costliest kinds of law practiced in the U.S. as it is. Tangling with it to extricate oneself from a sticky IP ownership situation could incur all sorts of fees, and these at higher rates than other, less specialized dilemmas.
Here’s how the figures shake out. A patent infringement case with $25 million at stake can range anywhere from $2 million to $9 million to resolve, and IP mediation alone costs roughly $100,000 per case. If the revenue losses don’t get you, the legal fees will. Protecting your IP the first time with far less costly preventative measures – like the right policies, training, and data security solutions – can make all the difference to some companies. Or at least to their executives.
Beware; if your company fails to protect its intellectual property with the proper legal due diligence, some courts could rule that you’ve forfeited your rights to it, leaving you without your intellectual property or a form of recourse. It’s best to get on this now and put the legal provisions in place to protect what you have. Protect what you have now. Many companies wait until their proprietary secrets are “just so” until they legally protect, but that could leave open vulnerable (and valuable) spots in the middle of development. On the other hand, some companies wait until it’s too late.
New IP protection legislation like the IDEA Act promises to allocate more funding to IP enforcement at the local level, and world powers like the Five Eyes Alliance have already turned a critical eye to global cases of systemic IP theft from foreign entities. However, government support doesn’t eradicate the need for private sector oversight or remove the onus for IP protection from the companies themselves.
Aside from putting the proper legal protections in place, securing your intellectual property in 2024 largely comes down to having the right cybersecurity measures in place. Key methods include:
Things like stringent password requirements, MFA, and Secure File Transfer (SFT) methods (so your data doesn’t get duped in transit) are, of course, also a given.
Intellectual property theft will only become more common as more and more companies complete their digital transformation. Now that everything is somehow accessible in cyberspace, it becomes a matter of business criticality to secure IP in the digital realm. Anything less will lead to costs that will soon be too high to bear.
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