Lawmakers Propose Amending US Economic Espionage Act

tradesecret bigYesterday, two United States Senators proposed legislation to address the theft of US trade secrets by foreign thieves.  U.S. Senators Sheldon Whitehouse (D-RI) and Lindsey Graham (R-SC) released a discussion draft for proposed legislation that would close a loophole that allows foreign hackers and the governments that support them to escape law enforcement.

It is no secret that trade secret theft is becoming a significant problem for US companies.

“Trade-secret theft and economic espionage threaten American companies and our nation’s economic competitiveness. Foreign thieves and hackers must not be allowed to escape accountability through loopholes in our criminal laws,” said Senator Whitehouse.

The cost to continuously invent the future is high.  Many foreign individuals, companies and governments are looking to short-cut the process by stealing the technological know-how of US companies, universities, and research facilities.  By stealing technology, foreign competitors can bring cheaper products to market faster without the significant upfront R&D costs.

In our current highly competitive global marketplace, trade secret theft is on the rise.  That theft causes US companies and the US economy to lose billions of dollars every year.  In order to combat such theft, the US has made trade secret theft a crime in the United States.

Senator Graham added, “Trade-secret theft and economic espionage can become forms of financial warfare. We must make sure we give law enforcement the tools to go after state-sponsored foreign hackers and organized cyber-thieves that are stealing our intellectual property.”

Over recent years, there has been an uptick in the number of trade secret theft prosecutions, resulting in hefty fines and jail time for the perpetrators.  Unfortunately, it is practically impossible to prosecute an individual who engages in such criminal activity if they are not in the United States, say through cyber attacks by foreign hackers.

A summary of Proposals for Discussion can be found here.

Obama Administration Releases the 2013 Joint Strategic Plan on IP Enforcement

I guess June must be “Let’s Talk About Intellectual Property Month” at the Obama White House.

victoriaYesterday, U.S. Intellectual Property Enforcement Coordinator, Victoria Espinel, released the 2013 Joint Strategic Plan on Intellectual Property Enforcement.

The Joint Strategic Plan expands upon the initial report released in 2010 that was meant to address industry and the Administration’s concerns about the proliferation of counterfeit goods, the increase in intellectual property theft, and the impact these have on the US economy and national security.

The 2013 plan to protect US innovation from misappropriation focuses on greater cooperation between Federal agencies to enforce intellectual property laws as well as increased cooperation with our trading partners to solve matters involving trade secret theft and counterfeit goods.  The plan supports private sector efforts to combat piracy through awareness and innovation

The report also addresses the challenges we face in a world where so much commerce (both legal and illegal) happens online.  Of specific concern are the increased capabilities of mobile devices, 3D printing, and digital goods (like music, movies, games, and software) that can be easily copied.

From the Plan’s Letter to the President and Congress:

Moving forward, the Administration will continue to improve upon these efforts. We will focus on infringement that has a significant impact on the economy, the global economic competitiveness of the United States, the security of our Nation, and the health and safety of the American public.

We will increase efforts to improve enforcement of intellectual property rights here at home, improve cooperation with foreign governments, and use our trade tools to improve protection around the world. We will promote the use of private sector voluntary best practices to reduce infringement online and in conventional marketplaces. We will press vigorously for protection of trade secrets overseas and enforcement actions to address their theft or misappropriation.

The Obama Administration has consistently recognized intellectual property theft as a major challenge to a strong and healthy US economy, and has taken action in the past to educate those most vulnerable to IP theft about the dangers as well as increasing enforcement actions against those that would violate our laws.

Increased awareness and better enforcement efforts have been amongst the Administration’s greatest improvements for protecting the IP rights of US companies and citizens.  I am happy to see that the Obama Administration continues to support these efforts.

Are You Making a Bad Investment?

Do you know what you are going to do with your patent?

 

Yesterday morning I sent the following tweet.

“All I hear is how expensive IP is.  Maybe you don’t understand its value; its purpose.  If you knew how to use it, you might spend more.”

This sparked a short twitter conversation with @ManagingIP about what aspect of IP is seen as expensive: protection, enforcement, or defense,  and whether IP spend is seen as a tax or an investment.

I think most companies see IP spend as a tax, and that the grumbles about IP being expensive are around protection, especially patent protection.  Maybe it’s because I’m listening to a lot of start-ups lately, and they’re short on money.

Or, maybe it’s because I’ve been doing this long enough to know that, even though IP enforcement and defense are expensive, the average company doesn’t really think about that aspect of IP protection.  The main event is protecting the invention or the brand, with little thought given to what they’re actually going to do with it once they get the patent.  (If I had a dollar for every time I heard, “You mean I have to enforce my patent?”)

The way I see it, many organizations in general view IP as a necessary evil.

Based on my 12+ years as an intellectual property attorney, I am under the firm belief that most companies protect their intellectual property out of habit.  They really don’t know why they want that patent.  They just do it.  And if these same companies just knew why they were protecting their IP and plan for its future use, they’d see a greater return-on-investment sparking more, and dare I say better, investment.  (Hence yesterday’s tweet.)

All of this got me wondering…

Why is the ‘getting’ so important?  I can’t think of any other business asset that people stockpile like patents.  Of course, I do understand that to use patents, organizations typically have to wait for a future event to happen, like an infringer comes along, counterfeit goods are being sold into your market, or someone wants to license your technology.  So, the stockpiling does make sense because you have to get it early for use later.

But what if you know that you will NEVER sue anybody for patent infringement?   Why do those companies still spend lots of money protecting their IP?

Is the amount of money companies spend on intellectual property worth it?

At what point is intellectual property protection a good (or bad) investment?  (And how do you know?)

If intellectual property is a business asset, that asset should bring the company value.  How do you measure the value IP brings to any given company?

Is it the amount of money the asset brings to the bottom-line?  If so, we’re most-likely talking about companies that engage in expensive licensing and litigation practices.  I would argue (based on the low number of patents that ever go to litigation) that’s not the average IP owner.

Or is the value in the portfolio size?  That strategy works for Japanese companies.

There is also value that is intangible, just like the asset itself.

There are a lot of factors that enter into answering these questions, like industry, type of technology involved, size of company, country of origin, risk tolerance, and 100 other factors I haven’t even thought about.

I have to admit that I’m not really sure how to answer these questions right now.

If you have thoughts, dear Readers, on what makes IP a good or bad investment, please let me know in the comments.

Big News from IP made simple

I am so happy to announce that I am offering a short guide with 10 helpful tips to get the most out of your intellectual property portfolio to all IP made simple Subscribers.

The guide is called 10 Things Every Business Should Do With Their Intellectual Property: A Quick IP Owner’s Guide. It is designed to give the typical IP owner a roadmap for how to best manage their intellectual property, and covers everything from knowing what the different types of IP are to how to plan and manage your intellectual assets.

Managing your intellectual property is not rocket science.  It is actually pretty simple.  It only requires that you to have a process or system in place (just like the systems you already have that manage your sales accounts, your finances, your customer service, etc.)  This Guide lays out the simple steps that every IP owner needs to take to create a great portfolio.

To get access to this free guide just go to www.ipmadesimple.com and type your email address into the box that says ‘email’ located in the big blue box on the home page. You will receive a welcome email with a link to the Guide as soon as your confirm your subscription to IP made simple.

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Be on the lookout for 2 new product offerings from me in the coming months.  Before the end of 2012, there will be two new ways to learn about intellectual property.

1.  I am in the process of creating a library of short tutorials on various intellectual property topics.  These short 10 – 15 minute presentations will allow you to learn everything you ever wanted to know about IP at your own pace.

2.  I will be also be offering you a chance to work with me one-on-one.  I will be offering a consulting option.  Under this program, on top of the 6 hours of IP training, I will conduct an IP audit of your business, review your contracts, and provide you with a plan to address your intellectual property issues.

More information on both of these products will be available shortly.

Websites, Webinars and Workshops. Oh My!

The Summer of 2012 has been the busiest on record for me and my business.  The new website is up-and-running, my first Workshop is scheduled for the end of September, and a FREE 4 part webinar series on IP basics will kick-off next Wednesday with a primer on trademarks.

I encourage you to explore the new website.  If you like what you see, sign up for the free webinar.  If you like what you hear, and want to learn more, please come to the IP made simple Workshop.

All the details are below:

My FREE 4 Part Webinar Series, Intellectual Property Essentials for Every Business, starts next Wednesday, August 29, 2012 at 11am EST with Trademarks 101: Protecting Your Reputation.  You can sign up for this free event at  http://www.anymeeting.com/PIID=E056DC85844F .

The rest of the series will take place as follows:

  • Wednesday, Sept. 5, 2012 at 11am EST, Copyrights 101: Protecting your Creative Works
  • Wednesday, Sept. 12, 2012 at 11am EST, Patents 101: Protecting your Innovation
  • Wednesday, Sept. 19, 2012 at 11am EST, Trade Secrets 101: Protecting your Know-How

 

The first IP made simple Workshop will be held on Thursday, September 27, 2012.

Time: 5 – 8pm

Location: The Accidental Gallery

300 Summer Street, #14

Boston, MA  02210

Cost: $297

You can check out details about the Workshop at my new website www.ipmadesimple.com.

Sign-ups for the Workshop are at www.ipmadesimple.eventbrite.com.

Trade Secret Theft is a Real Crime

And those found guilty go to a real jail cell.

Now you know that Trade Secret theft is on the rise and costing US companies billions of dollars in revenues.  You’ve also learned 10 important things about trade secrets and how to protect them.  Now, let’s look at three recent examples of trade secret theft that have made the news.

1.  Sanofi Aventis – Research Scientist.

Who stole what?  A former Sanofi research chemist stole thousands of chemical compounds (a company trade secret) from Sanofi.  The research scientist, a 30 year old Chinese national named Yuan Li, had worked for Sanofi for 5 years developing compounds for use in future drugs.

How did she do it?  Yuan Li downloaded the trade secret information and used personal e-mail or a USB thumb drive to transfer it to her home computer.

What did she do with the trade secrets? She tried to sell the compounds through, Abby Pharmaceuticals, the U.S. unit of a Chinese company.  Yuan Li was a 50% owner in Abby.

What happened to her?  Last month, Yuan Li was sentenced to 18 months in prison by a New Jersey Court.  She must also pay $131,000 in restitution.

2.  Akamai – Finance

Who stole what?  Elliot Doxer, who worked in Akamai’s finance department, contacted the Israeli consulate in Boston in 2006, offering to spy on Akamai and pass secret information to them.  The Israeli government informed the US government, which set up a sting operation.

What did he do with the trade secrets?  Mr. Doxer delivered numerous secret files to an undercover federal agent posing as an Israeli intelligence officer over a period of 18 months.  (No information ever made it into foreign hands.)

What happened to him?  Mr. Doxer pled guilty to foreign economic espionage and was sentenced to six months in prison, six months home confinement, and a $25,000 fine in December, 2011.

3.  Intel – Design Engineer.

Who stole what? A former Intel computer hardware engineer stole 13 secret documents from Intel’s facility in Hudson, Massachusetts. The documents are worth over $1 billion in research and development costs that described Intel’s new microprocessors.  Biswamohan Pani, an Indian national, worked for Intel from May 2003 to June 11, 2008.

How did he do it?  Mr. Pani resigned from Intel in late May, 2008, saying he was going to work for a hedge fund, and took his accrued vacation time until his last official day on June 11.   However, he started working at Advanced Micro Devices, Inc. (AMD), an Intel competitor, on June 2, 2008.  That’s right…he worked for both companies for more than a week.  From June 3 to June 11, 2008, he remotely accessed an encrypted system at Intel, and downloaded the documents to his hard drive.

What did he do with the trade secrets?  Nothing.  Intel discovered the breach very quickly, contacted the FBI who acted fast to stop any information from being used.  It is thought Pani intended to use the information to advance his career at AMD.  It is important to note that AMD denied knowledge of Pani’s wrongdoing, did not ask him to steal the information, and has cooperated fully with federal investigators.

What happened to him?  Mr. Pani pled guilty to 5 counts of wire fraud in US District Court in Massachusetts.  Each count has a possible sentence of 20 years, as well as a $250,000 fine.  The prosecutors are recommending that the judge sentence Pani to six years in jail. Sentencing is scheduled for August 8.

When I see these stories, part of me says “Really, you thought you would get away with this?”, but then I remember that trade secret theft is a real crime.  These are the people who were caught.   How many more are out there have been successful?

Obviously, the examples here involve big name companies with thousands of employees, but don’t think that trade secret theft is merely a problem for big business.  The risk exists for big and small companies, as well as universities, research facilities and non-profits alike.

If you want to protect your organization’s trade secrets, you must be proactive.  Identify them early.  Have a plan to keep them secret.  Educate your employees about intellectual property and what it means to you.  Don’t assume everyone who works for you has your best interests at heart.

Ten Things You Need to Know About Trade Secrets

Trade secrets are what make your business unique.

They are your secret sauce, or ‘Grandma’s Secret Recipe’.

They make your product or service different from everyone else out there.

They are also the most ignored form of intellectual property today.

Here are 10 things you should know in order to start protecting your valuable intellectual property today.

1.  A trade secret is any formula, pattern, device or compilation of information which is used in one’s business to give him an advantage over competitors who do not know or use it.  Trade secrets include special manufacturing methods, processes, techniques, chemical formulas, computer software, data, and customer lists.

2.  Trade secrets are important.  I always like to ask my clients, how they would react if they found out that their #1 sales person just left to work for the biggest competitor and took their customer list and pricing information with them.  How would you react?  Would you get a pit deep down in your stomach?

If that thought scares you, then you know how important your trade secrets are to your business.  Those client lists and that pricing information could be trade secrets, and if you aren’t taking active steps to protect them, then that information could be walking out the door.

Now imagine if that person left with your test data, a prototype, the secret formula to your…I think you get the idea.

3.  Trade secrets are protected by law.  However, trade secret law is not uniform across the United States.  Contact an attorney in your state to understand the specific laws governing trade secrets where you do business.  If you are doing business overseas, contact an attorney in the foreign country to see what you need to do to protect your IP in that country.

4.  Unlike patents, trademarks or copyrights, there is no registration process for trade secrets.  They reside within your business and you must protect them.

5.  Trade secrets don’t expire.  They can potentially last forever if you can keep the secret that long.  There is always the risk that an independent third party may legitimately discover and use the secret.

6.  To protect your trade secrets, you should:

  • Identify them!  (You have to be specific.  Not everything in your business is protected under trade secret law.)
  • Limit employee access.  Disclose your trade secrets on a need-to-know basis.
  • Limit visitor’s access. Have all visitors sign-in.  Provide badges to indicate they are visitors in the building. Don’t let them wander around.  Accompany them around the building.  Avoid showing them sensitive areas.
  • Provide an education.  Make sure your employees understand their obligations when it comes to all of your intellectual property, including trade secrets.
  • Have confidentiality agreements, written policies, and internal procedures for employees.

7.  If you need to disclose your trade secret to a third party, you should take certain precautions before you disclose your trade secret.  Any trade secret disclosure to third parties, i.e., customers, suppliers, consultants, etc., should be limited to only those people who NEED TO KNOW under a written agreement of confidentiality of indefinite length.  (Again, check with an attorney in your state to find out the exact steps you need to take to protect your trade secrets.)

8.  It is a crime to steal a company’s trade secrets.  In the United States, perpetrators of trade secret theft are prosecuted under the Economic Espionage Act of 1996.

9.  With the rise of the internet and technology, it is easier than ever for your employees to steal trade secrets.  What used to be a labor intensive type of theft, think photocopying documents after everyone else goes home, is now easier than ever with the help of technology we use every day.  An employee can simply download files to a thumb drive and walk out the door.

10.  As we discussed last week, trade secret theft is on the rise.  Protect your valuable intellectual property by learning what you need to be doing today to stop trade secret theft in your organization.

Bonus Question.  Can you name the most well-known trade secret in the world?  Let me know your guess in the comments below!

Next week, I’ll talk about some recent high-profile trade secret theft cases.

Did You See this Billboard Recently?

FBI Billboard

If you did, it means you live or work in a city with industries and companies at high risk for trade secret theft.

Last month, the FBI put up these billboards in 9 communities across the nation, including Boston, New York, Washington, D.C., and San Francisco, in an effort to raise awareness about a growing problem: industrial espionage.

What exactly is ‘industrial espionage’?

It’s when foreign governments, corporations, and citizens spy on US companies in an effort to steal information that can provide them with some sort of economic benefit or advantage.  They are often looking for technology, pricing information, test data, or customer lists, a.k.a. the company’s trade secrets.

Why does the US Government care about trade secret theft?

Because it is a big problem for US companies.  The FBI estimates over $13 billion has been lost since October, 2011 due to trade secret theft.  That’s $13 billion in only 7 months!

In fact, state-sponsored espionage targeting the intellectual property of U.S. companies is growing so fast that the FBI considers trade secret theft a national security issue.

To be honest, the Government should be concerned about the rise in industrial espionage, and if you are an innovative company, you should too.  I’m just not sure a billboard campaign is the right approach.

How many people are going to really understand the message behind the billboards?  Seriously, I wish I had seen one in person, but RI didn’t make the cut.  Would the average person driving around in their car, stop and think about whether or not their trade secrets are at risk?  Would they even know what a trade secret is?

I’m not sure they would.

Trade secrets are often afterthoughts in corporate America, and companies with really good trade secret awareness tend to be large.  Most everyone could identify a trade secret when asked (the formula for Coca-Cola usually springs to mind), but most companies can’t identify their own trade secrets, especially small technology firms.

Why?  They don’t understand trade secrets.  They don’t quite know what they are or what they can and should do to protect them.  Which leads to the problem…if companies don’t understand trade secrets, then they can’t identify them and take the necessary steps to protect them.

I’ll continue this conversation next week with a short primer on trade secrets.

Here are a some great resources to get your trade secret education started.

- The FBI Website has some good information on trade secrets and the problem of industrial espionage.

- The National Intellectual Property Rights Coordination Center (IPR Center) is a multi-agency taskforce designed to share information, develop initiatives, coordinate enforcement actions, and conduct investigations related to IP theft.  Check out their website here.

In the meantime, if you think your company could use some help identifying and protecting your trade secrets, call me at (508) 878-3590 or email me at kelli@ipinfocus.com to set up an appointment.

I first wrote about this issue back in 2010 after I attended a workshop on economic espionage.   Click here to check out that post.