Company leadership that assume they can…innovate, develop, and commercialize (products-services) faster than economic-competitive advantage adversaries can misappropriate – infringe the key intangible assets is, at minimum, engaged in a far too trusting and probably naïve strategy that will result in disappointment on many levels, i.e.,
1. Since the early to mid-1980’s, intangible assets (i.e., intellectual, structural, relationship capital) have outpaced tangible – physical assets as the dominant source of most company’s value, revenue, and ‘building blocks’ for growth, profitability, and sustainability. After all, it is an economic fact that 80+% of most company’s value today either lie in – emerge directly from intangible, not tangible assets! No surprise then that company investments in intangibles has substantially outpaced investments in tangible-physical assets.
2. Since the Economic Espionage Act became law in the U.S. in 1995, it’s adverse affects on companies profitability and sustainability have been characterized as “the greatest transfer of wealth in history” (from intangible asset owners to criminals) said General Keith Alexander, NSA (National Security Agency) director and commander of U.S. Cyber Command, at the American Enterprise Institute in 2012. This is an economic fact-reality that remains fully intact today!
a. BlackOps Partners Corporation, whose expertise includes counter- intelligence and safeguarding trade secrets and competitive advantages for Fortune-listed companies, quite reasonably and conservatively estimates that $500 billion in ‘raw innovation’ is stolen from U.S. companies each year. Raw innovation includes trade secrets, R&D, intellectual and structural capital and numerous other intangible asset forms that collectively provide companies with extraordinarily valuable competitive advantages.
b. By most estimates, company’s creative capital (intellectual, structural, and relationship) ala intangible assets, serve as the dominant drivers of company value, revenue, and competitiveness for 10-year segments, until replaced and/or integrated with other (new) intangibles. In this context, BlackOps Partners Corporation, CEO, Casey Fleming, estimates U.S.-based companies lose the equivalent of $5 trillion out of the U.S. economy every year to economic espionage”.
For publicly held companies there are fiduciary-assumed responsibilities to safeguard investor positions…with respect to risk, certainly, the inevitability of economic espionage risk. That said, previously, it was seldom in the interest of companies to announce innovation (intangible asset) breaches by suspected economic – competitive advantage adversaries to the public. Under those circumstances, federal investigating agencies, i.e., the FBI, frequently found it challenging to gather sufficient evidence to mount criminal charges, ala the Economic Espionage Act (EEA). Too, there were asset valuation challenges with respect to converting – translating such losses (again, comprised largely of intangible assets) into specific dollar amounts, other than estimates.
Important distinctions between industrial and economic espionage…according to the September Concierge Report from MindStar Profiling & Security, the difference between industrial and economic espionage is subtle yet significant, says Nicole Shadowen in October 2016.
• Industrial espionage is…spying between companies in the same industry and country. It’s illegal because it entails taking privately held intellectual property and using it on behalf of your company instead. Industrial espionage is distinct from competitive intelligence which is the gathering of public data about another company to better understand the market/trends.
• Economic espionage is…similar in practice and function, the difference is the intent and identity of the person behind the computer. These actors are generally representative of a nation state, trying to steal trade secrets or intellectual property on behalf of their country and to weaken another country by bringing this information into the former’s commercial market.
So, the I can invent and commercialize faster than adversaries – competitors can steal strategy…touted at a time when corporate and state sponsored business intelligence, economic espionage, information brokering, and data mining and cyber espionage are consistently intensive, is, at minimum, unwise.
The Office of the National Counterintelligence Executive (ONCIX)…Annual Report to Congress on Foreign Economic Collection and Industrial Espionage and the American Society for Industrial Security’s Trends In Proprietary Information Loss Survey, and SANS Institutes’ Study on Cyber Espionage, just to site a few, routinely convey that ‘the U.S. is persistently threatened by – at risk of theft of their proprietary economic information and critical technologies.
ONCIX’ Annual Reports consistently note that risks, i.e., misappropriation, infringement of sensitive – proprietary business information and advanced innovation to U.S. companies rise annually and asymmetrically. A not insignificant contributor to these rises lies with economic and competitive advantage adversaries and even allies. There is evidence their respective agencies have indeed shifted their espionage resources-spending away from the conventional national security and military hardware to economic and commercial targets. This translates as the assets being sought are not simply technological data but most all forms-categories of intangible assets, which can, when developed-commercialized effectively, deliver lucrative economic and competitive advantages globally.
Contrary to some company’s perceptions…leading-edge innovations and technological knowhow (intangible assets) are not the only assets being targeted by adversaries. (ONCIX Annual Report to The President on Economic Espionage). Obviously, company’s plans, intentions, and capabilities are of interest to competitors and economic adversaries alike because the perspectives-insights gleaned can be used to undermine the targeted company’s competitive advantages, erode its profitability, and stifle momentum for its projects and initiatives.
As these realities become more routine action items on company management leadership and board agendas…they may be less inclined to summarily dismiss the benefits of adopting a more strategic view about protecting, preserving, and monitoring the value of their intangible assets.
Questions which many U.S. company’s should be asking themselves…according to by Christopher Burgess on December 21, 2017…
• Is this company developing – products product and/or services that would be useful to particular-countries and the global (sophisticated, inter-locking) economic espionage processes at work?
• Who are this companies primary competitors?
• Does this company make widgets for and/or provide a service used in any country’s defense industrial sector?
• Has any country or company announced a strategic plan to make ultra-large investments in products, technologies, and/or services comparable to those your company is engaged in R&D and/or already delivering?
Answer “yes” to any of these, and other relevant questions, and company leadership would find it prudent to recognize one way to such maximize investment dollars, is to reduce R&D costs. Doing so by economic and competitive advantage adversaries may translate to acquiring existing – comparable technologies already belonging to – being used by others. Already registered patents, in such circumstances are often merely regarded as a modest hurdle or wholly dismissed as representing any sort of impediment to achieving their objective. This can occur through licensing, joint ventures, collaborations, or economic espionage.
Michael D. Moberly March 6, 2018 St. Louis 314-440-3593 email@example.com ‘Business IP and Intangible Asset Blog’