What Is Intellectual Property Theft?

Intellectual property theft, more commonly known as IP theft, is a growing concern in today's digital space. From geopolitical threats and economic impacts to trademark and copyright infringements, these concerns and more have increased awareness of intellectual property rights protection.

Definition

Intellectual property (IP) theft is the unauthorized use, exploitation, or outright theft of creative works, ideas, trade secrets, and proprietary information otherwise protected under intellectual property laws. IP theft covers a wide range of cases, including trademark violations, copyright infringement, and patent infringement.

IP theft can damage individuals, businesses, and governmental entities that have invested substantial time and resources to develop their intellectual property. At scale, IP theft undermines innovation and economic growth. Unfortunately, ever-increasing digital technologies and assets have made it significantly easier for hackers and thieves to reproduce and distribute digital IPs. This amplifies the risks and reinforces a growing need for effective IP protection and enforcement.

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Types of Intellectual Property Theft

Intellectual property theft has become increasingly complex as more and more assets are digitized and accessible online. Still, many types of IP theft remain a constant threat, whether in digital or physical forms.

Copyright Infringement

As one of the most common forms of IP theft across different industries and sectors, copyright infringement refers to the unauthorized use, distribution, or duplication of a creative work protected by copyright law. This includes software, music, films, books, and other creative works.

Cases involving copyright infringement are as wide-ranging as the types of media and assets infringed upon. There are countless examples of copyright infringement, from pirating software, downloading paid media for free, or replicating literary textbooks without permission.

Trademark Infringement

As a form of intellectual property that shapes a brand's identity, trademarks are recognizable logos, symbols, names, or phrases that legally identify particular goods and services. Protected by IP law, trademarks are intended to distinguish certain products or services of one entity from those of others, thereby differentiating counterfeits and knockoffs.

Trademark infringement occurs when these protected identity elements are used without a license or authorization. The most common scenario involves selling counterfeit products under a well-known brand name or mimicking a similar brand logo without permission. However, these cases have become increasingly sophisticated, with organizations prioritizing international trademark protection against foreign threats.

Patent Infringement

Patent infringement is another prevalent issue that muddies the global marketplace waters. This type of IP breach involves targeting a manufacturing process, design blueprint, or other types of intelligence that document the making and selling of a product.

Synonymous with knockoff products, off-brand manufacturers produce a close replica of the original patented product to poach sales on the coattails of a successful brand. Like trademarks and copyrights, only goods with a filed patent are protected against infringement. Even early-stage innovators, startups, and entrepreneurs should consider protecting assets from these potential IP infringements.

Trade Secret Theft

Trade secret theft is the unauthorized use, disclosure, or acquisition of confidential business information that drives a company’s competitive advantage. This type of intellectual property theft includes stealing information like product development and manufacturing processes, research protocols, customer lists, and other strategic intel integral to the business.

Examples of trade secret theft include a company's executive team purchasing confidential data stolen from a competitor. Another scenario is when a freelance contractor signs a confidentiality agreement with a company but later sells that company's trade secrets to a competitor. In the digital economy, every widget, plugin, app, system, or script – especially successful ones – is a high-interest target among attackers.

Design Infringement

Similar to trademark infringement but more brand identity-focused, design infringement involves the unauthorized replication of an original design, layout, or visual artwork that identifies a product protected under intellectual property laws.

This can include protected designs such as a product’s consumer packaging, a particular clothing cut, or industrial designs. In the consumer packaged goods space, food and beverage manufacturers use unique packaging like oddly shaped bottles and in-store displays to market and differentiate their products.

What Are Historical Examples of IP Theft?

Iconic cases of intellectual property theft abound, some dating back many centuries. Several are stories that test the ethics and upholding of IP law.

• Thomas Edison's Phonograph – While Thomas Edison filed the first official patent for the phonograph, Frenchman Charles Cros initially invented it. Cros contested Edison's patent but failed, resulting in Edison making millions from his invention.
• The Wright Brothers and the Airplane – The path to success for the Wright Brothers was not smooth flying, as several competing airplane inventors, like Samuel Pierpont Langley and Glenn Curtiss, aimed to roll out similar airplanes. Patents issued on behalf of the Wright Brothers enabled them to prevent others from building similar planes, giving the brothers a monopoly on airplane production for several years.
• Apple vs. Samsung – In 2011, Apple filed a lawsuit against Samsung for infringing on multiple patents related to Apple iPhone and iPad product design. Launching an ongoing series of cases between the tech giants, Apple claimed that Samsung had replicated the look and feel of its devices, including the user interface and icons. Apple was awarded just over $1 billion in damages from Samsung.
• Napster – The epic file-sharing service where users could freely distribute media, Napster became a rapidly-growing tech trend in the late 1990s. Users uploaded and shared music and video files, completely disregarding copyright protection. Once the music industry caught on to Napster's free platform to download music, several record labels, including the Record Industry Association of America, sued the company. The case set an important precedent in enforcing copyright laws on the internet.

Common Causes and Culprits of Intellectual Property Theft

The range of people and parties participating in IP theft is becoming increasingly sophisticated. Some of the most common culprits associated with IP theft include:

• Foreign Adversaries – In a geopolitical climate where unrestricted warfare runs rampant, foreign governments are often interested in stealing intellectual property from other countries to gain an economic, technological, or military advantage. These actors may use a variety of tactics, like cyber espionage, hacking, and insider theft.
• Insiders – Employees, contractors, freelancers, and other insiders are common culprits responsible for IP theft. These individuals have access to sensitive information, like password databases or trade secrets, and steal these assets for personal gain or to sell to competitors. Sometimes, they're also coerced or bribed by outsiders.
• Competitors – To gain a competitive advantage, industry rivals are often interested in stealing IP from their competitors, especially dominant players. They may use various methods to acquire valuable intelligence and competitive insight, including corporate espionage, hacking, or insider theft.
• Hackers – Cybercriminals are another common culprit of IP theft. These actors target companies or individuals to steal valuable information, such as credit card numbers, confidential information, or customer data. Hackers use a variety of methods, including phishing scams, malware, or social engineering tactics.
• Threat Actors – Organized crime groups, cyber terrorists, and other threat actors may also be involved in IP theft, especially against businesses, governments, and infrastructure organizations. Threat actors often engage in direct data theft, phishing, vulnerability exploitation, or spreading malware.
• Rogue Employees – Individual employees sometimes steal intellectual property from their employers, either for personal gain or that of a competitor or foreign parties. This includes stealing process documentation, trade secrets, customer lists, or other sensitive information.

What Is the Cost of Insider Threat Data?

Insider threats are a costly expense attributed to IP theft. The Ponemon Cost of Insider Threats report, which examined the rise of insider threats, uncovered a host of revealing facts and statistics.

• Insider threat incidents cost businesses an average of $15 million annually. Since 2020, the cost of addressing an insider security problem has increased by 34%—from $11.45 million in 2020 to $15.38 million in 2022. The frequency of insider-led incidents is also up by 44% in 2022.
• The risk of insider threat has increased due to more remote workers (primarily fueled by the Great Resignation), the accelerated pace of digital transformation, and the rapidly rising shift toward using cloud-based applications.
• Signs of high-risk organizations include employees not trained in cybersecurity, inconsistent device policies, employees sending confidential data to an unsecured cloud, and the disregard of security policies.
• Careless insiders account for 56% of incidents, malicious insiders 25%, and credential theft increased from 14% in 2020 to 18% in 2022. The cost of credential theft to organizations increased by 65%, from $2.79 million in 2020 to $4.6 million in 2022.
• The cost of insider threats to financial services organizations increased by 47% to $21.25 million in 2022. The retail industry's insider security events cost jumped 62% to $16.56 million in 2022.
• To mitigate the damage of an insider-related security breach effectively, organizations must focus on containment, investigation, and prevention and act fast.

What Is the Impact of Intellectual Property Theft?

The detrimental impact of intellectual property theft is a major concern for many organizations. Several factors contribute to losses from IP theft.

• Financial Losses – The theft or loss of intellectual property can result in significant financial losses for companies. This includes lost revenue, decreased market share, and increased expenses related to litigation, security measures, or damage control. One of the most prominent cases was China's theft of a wind turbine company’s intellectual property resulting in a $1.2 billion case.
• Remediation Costs – It's not uncommon for organizations to incur additional out-of-pocket costs related to litigation and remediation efforts. This includes funding legal counsel, hiring experts to investigate the breach, or integrating better security measures. For instance, in a multi-billion dollar IP theft case, the company under attack spent $14 million alone on public relations, technical investigations, attorney fees and litigation.
• Reputational Damage – Insider threats can also result in reputational damages for companies. If a brand is perceived as not taking adequate measures to protect its intellectual property, it may lose the trust of its customers, investors, and stakeholders. For example, Facebook’s stock dropped by 7% – valued at a $43 billion loss – after the catastrophic data breach incident involving Cambridge Analytica.

How to Prevent IP Theft and Mitigate Damages

Preventing intellectual property theft and mitigating damages has become a high priority for organizations, especially high-profile brands, tech companies, and governmental agencies. Some of the preventative practices involve:

• Maintain limited access controls – Ensure that only authorized personnel can access confidential information. Use proper cybersecurity protocols, such as multifactor authentication and encryption, to safeguard sensitive data.
• Perform IP protection audits – Conduct regular audits to identify gaps or vulnerabilities in your IP protection strategy and ensure they’re addressed to avoid exploitation.
• Register your intellectual property – Apply to have your intellectual property filed and registered with the relevant authorities and establish legal ownership to prevent others from mimicking your ideas without permission.
• Secure your networks and devices – Leverage technologies like firewalls, anti-virus software, and other professional cybersecurity measures to protect your network and devices from data breaches and cyber-attacks.
• Utilize non-disclosure agreements – Whenever possible, use non-disclosure agreements (NDAs) as a layer of protection when sharing sensitive and confidential information with employees and outside parties.
• Monitor your competitors – Keep an eye on your competitors and watch for any suspicious activity or infringement on your intellectual property, such as knockoff product replicas.
• Conduct regular employee training – Train your employees on the importance of protecting intellectual property and how to identify common cyber threats, particularly around IP theft.
• Enforce your rights – Exercise legal action against any parties infringing on your IP rights, thereby preventing further damage and deterring other threats from doing the same.
• Stay current on the latest threats – Stay informed about the latest threats and vulnerabilities in the intellectual property space, and update your IP protection strategy accordingly.

How Proofpoint Can Help

Proofpoint is a global leader in cybersecurity solutions, helping organizations protect their assets and people from a myriad of cyber threats, including IP theft. Not only does Proofpoint offer the systems and technology to help protect your data, but the company takes a people-centric approach to effectively block attacks, secure cloud accounts, and educate its users. Learn more about Proofpoint as your team’s solution to prevent intellectual property theft from breaching your assets.