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Cost Of Intellectual Property Theft Revealed

Intellectual property theft in the US costs around $59m a year, according to the results of a survey of CEOs of Fortune 1,000 companies and of 600 small and mid-sized companies that belong to the US Chamber of Commerce.

The 10th Trends in Proprietary Information Loss Survey was sponsored by ASIS International, PricewaterhouseCoopers, and the US Chamber of Commerce. The report found that respondents experienced proprietary information and intellectual property losses of between $53 billion and $59 billion from July 1, 2000 to June 30, 2001.

The greatest dollar value of loss per incident were seen in research & development departments ($404,000) and financial departments ($356,000). The greatest risks for companies reporting a loss of proprietary information and intellectual property were former employees, foreign competitors, on-site contractors, domestic competitors, and hackers.

The main problems caused by these losses were increased legal fees, and loss of revenues. For larger companies, loss of competitive advantage was the most serious problem, while for financial institutions, embarrassment was the biggest concern. The most common areas of infiltration were R&D (49%), customer lists and related data (36%), and financial data (27%).

“While the risk of cyberterrorism is increasing, the theft of intellectual property is where companies are incurring the most losses to date,” said Jay Ehrenreich, Senior Manager at PricewaterhouseCoopers’ Cybercrime Prevention and Response group.

The report concludes:

• Companies must overcome their reluctance to share, even anonymously, information about losses in order to determine the full extent and nature of the problem.
• Companies need to centralise their loss reporting systems to ensure that comprehensive data is gathered and can be reported.
• Businesses must make information protection a higher priority and must institute sound protection procedures.
• Corporations must set up a system for valuing intellectual property assets as they are created because over the longterm the loss in competitive advantage and market share could far outweigh legal fees.

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The above article appeared in the November, 2002, issue of Foresight - The Journal of Risk Management, published by Risk and Insurance Research Group, Ltd. and is reprinted with permission.

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March 2003