Archive for 'Intangible asset protection'

Information Asset Protection, Thinking Differently

June 27th, 2016. Published under 'Safeguarding Intangible Assets', Intangible asset protection. No Comments.

Michael D. Moberly June 27, 2016 ‘A blog where attention span really matters’!

Change and varying levels and/or periods of disruption have become routine characteristics to many of our respective work environments. Similarly, indeterminate repetition of past practice singularly rooted in the notion ‘that’s the way it’s always been done’, absent curiosity or consideration of the structural changes that have occurred in the interim, has, in growing number of instances, wisely give way to nuance.

Of the multiple nuances referenced here, one is that information/data (acquired, developed, transmitted, and received) is likely to achieve – produce the value which it is most capable of delivering if there are structural assurances in place for individuals and/or business units, etc., which have the ability to use-apply that information effectively actually get it. More succinctly perhaps, a fundamental shift occurs, away from the pretentiously broad (simple) construct of ‘knowledge is power’ to a more nuanced construct of sharing the right information-knowledge with the right people is power’!

Of course doing so, puts organizations – companies on a prelude to a (necessary) ‘revolution’ of sorts, in terms of how their proprietary information is safeguarded and ultimately disseminated – shared. The rationale for doing so emanates from the greater need today wherein there is emphasis on…
• the speed of knowing, and
• the speed which effective action can be taken – applied, as a product of knowing.
• better projections of individuals and/or (business) units that need to know.
• recognizing what information individuals-units are not getting, but should.

For me and others working in the IA (intangible asset) arena, this collectively translates as a new paradigm for safeguarding proprietary information during its acquisition, development, analysis, and sharing. Among other things, this entails…
• recognizing the challenges and adversaries.
• knowing what specific information should – needs to be safeguarded.
• reduce, if not eliminate the conventional informational silos frequently erected around dated presumptions
of ‘need to know’, as if ‘secrecy’ was somehow innate.

Please consider how many companies/organizations function-operate as if their information assets are classified or a national secret? Organizations are now obliged to position their intake, development, and analysis of information to ensure it is disseminated – shared with individuals – business units that can process – utilize the information most effectively.

In other words, companies-organizations are obliged to move away from…
the conventional ‘who needs to know’ to operating cultures in which knowledge leads to better performance, merely by recognizing…
• who doesn’t know, and
• who isn’t being informed.
Specifically, endeavor to create an organization-wide community of situational awareness and application of intellectual, structural, relationship, and creative capital.

In other words, retired General Stanley McChrystal believes that government-defense entities, and by extension, companies and organizations, should be more concerned with essential strategic information that is…
• routinely being ‘locked away’ from legitimate users, based on an antiquated system of classifying
information,
• than with individuals who may leak proprietary information.

Be assured, either can be damaging to an organization’s ability to achieve…but, given the vast amounts/levels of information that are regularly produced, i.e., ‘big data,, etc., arguably, organizations are rapidly approaching the point that sharing information and ensuring the right individuals-business units are provided information in a timely manner and accepting, even assuming some or all of the information may-will be leaked, infringed upon, and/or otherwise stolen-acquired by economic – competitive adversaries is a preferred position to keeping vital business information out of individual – business domains that could use it best.

This makes many conventional (business) instincts – practices of information asset protection, classification, and dissemination simply wrong-headed. Similarly, organization’s that (still) consider the influx of new strategies, new processes, and new techniques, i.e., structural, relationship, intellectual, and competitive capital as constituting non-collaborative and non-contributory tangible, (not intangible) assets will find business success elusive in today’s irreversible go fast, go hard, go global business environment. Instead, structural, relationship, intellectual, and competitive capital are integrated – collaborative categories of IA’s that warrant dissemination-sharing and action.

This post was influenced by a TED Talk given by Gen. Stanley McChrystal in March, 2014 and adapted for application to the private sector by Michael D. Moberly.

Cyber Warfare – Security Language Is Reframing Our Perspective

June 15th, 2015. Published under Cyber security, cyber warfare., Intangible asset protection. No Comments.

Michael D. Moberly    June 15, 2015   ‘A blog where attention span really matters’!

Some time ago, there appeared to be a transition of sorts in language regarding computer – IT system security. What had traditionally been characterized as defensive actions (products, services, etc.) to prevent and/or mitigate computer – IT system vulnerabilities and infiltrations by hackers or economic-competitive advantage adversaries was undergoing change.

The language – terminology now used to describe what I believe to be similar phenomena are cyber-security and cyber-warfare.  Are these distinctions without a difference?, I don’t believe they are. The latter is presumed to be executable on a broader scale, with greater frequency, sophistication, stealth, and other asymmetric features which can destroy data, deploy various types of malware, or siphon (extract) specifically targeted data-based intangible assets from a single company and/or one of the pillars to our national infrastructure literally, in nanoseconds.

What troubles me most about the term cyber-warfare particularly, is the inference that ‘all things evil’ to computer – IT system(s) originate from afar, that is, they are state sponsored or the product of growing numbers of organized and sophisticated non-state actors, i.e., legacy free adversaries.

Let’s be clear however, I am not questioning whether either of these characterizations are regular, if not the primary initiators, as there is ample evidence (anecdotal and otherwise) that is the case.

The attention and alarms government agencies particularly sound regarding cyber threats and cyber warfare are warranted and I seek not to dispute nor diminish their significance.  After all, the adverse cascading havoc to any nation’s infrastructure created by a single offensive cyber strike-attack, we must recognize, could be incalculably cataclysmic.

Obviously, there are on-going discussions – debates in c-suites globally regarding the most effective expenditure, strategy, and/or practice to mitigate, if not prevent these persistent and ever larger risks. Only the uninformed would assume such challenges will dissipate in the future.

So, among CSO’s (chief security officers), CRO’s (chief risk officers), CISO’s (chief information security officers), CIPO’s (chief intellectual property officers) and certainly legal counsel, sleep will surely be lost. Is it best to advocate your company or organization remain primarily in a defensive mode, e.g., repel, prevent, and contain?, or, independently engage in offensive and/or pre-emptive initiatives assuming such actions will produce some level of deterrence versus the sustained risk and likelihood of escalation currently experienced.

Before any company travels too far down a particular strategic path, it’s important to recognize that the U.S. is distinctive from many other countries in that most of the pillars to its national infrastructure are privately held and operated, apart from direct government control as is the case with numerous other countries.

Thus, independent action (offensive, or pre-emptive) taken by a privately held company against a specific state sponsored actor or cyber adversary would produce, as yet, unknown reactions that may well exceed an inclination to publicly expose ‘who’s doing what to whom’. From an information (intangible) asset safeguard perspective, I believe the subject is being too narrowly framed and perhaps overly influenced by broader cyber security – warfare perspectives.

By continuing to frame computer-IT security in ever broader contexts, i.e., cyber security and cyber warfare, little or no space remains to recognize companies’ mission critical, sensitive, proprietary, and competitive advantage intangible asset-based information routinely still exist in formats other than electronic ‘ones and zeros and bits and bytes’.

I am certainly not suggesting the prevailing perception regarding the origins of adversaries, cyber attacks, and cyber warfare is misguided.   Instead, I am suggesting, such perceptions and the accompanying expenditures and strategies give short shrift to the…

economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’  for growth, sustainability, and profitability today lie in – evolve directly from intangible assets e.g., intellectual property, competitive advantages, brand, reputation, and intellectual, structural, and relationship capital. 

Thus, the value, profitability, and competitive advantage, etc., rightfully developed and owned by a company is not exclusively housed in a computer or IT system and therefore not exclusively vulnerable to cyber attacks or cyber warfare.

Too, information asset safeguard policies and practices dominated by an IT or cyber (risk, threat) orientation tend to minimize the reality that most companies today operate in an extraordinarily fast-paced, competitive, and predatorial knowledge-intangible asset based global economy.  In this irreversible global environment, information (intangible) assets are developed, acquired, used, and disseminated in extraordinarily short time frames.  Endeavoring to safeguard or secure these assets, in my view, should not be exclusively conceived or practiced solely through an IT – cyber security lens.

Instead, responsibilities for safeguarding valuable information (intangible) assets should be embedded in (asset) developers-owners-users respective orientation, ethic, and enterprise culture. The reason is, there is consistent and irreversible rise in intangible asset intensive and dependant companies in which information assets exist not solely as conventional tangible assets, rather as intangible assets, i.e., intellectual, structural, relationship, and competitive capital, etc.

As information (intangible) asset safeguard specialists know all too well, variations of a company’s – organization’s proprietary – sensitive business information is often prone to percolatating throughout an enterprise making it challenging to definitively restrict, confine, or limit its accessibility solely to conventional IT products, i.e., laptops desktops, or ‘the cloud’.  Again, it’s relevant to recognize that intellectual (structural, relationship, and competitive) capital seldom, if ever can be wholly concentrated in electronic ‘ones, zeros, or bits and bytes’.

Similarly, information safeguard policies and practices supported by a presumptively superior IT – cyber security system-program, can be misleading. For example, if a company installs – executes a new IT-cyber security system is proclaimed it to be effective, presumably then, a company’s proprietary information is secure, seldom becomes the reality which the company aspired.  In today’s aggressively predatorial global business transaction environment eager to acquire actionable intelligence that translates into lucrative competitive advantages, that is a message no company should, even inadvertently, be communicating.

 (This post was inspired by NPR’s Tom Gjelten’s three part series on cyber attacks and cyber warfare, February 11th, 12th, and 13th, 2015 on Morning Edition.)

Cyber Attacks Mutually Assured Disruption of Intangible Assets!

June 3rd, 2015. Published under Cyber security, cyber warfare., Intangible asset protection. No Comments.

Michael D. Moberly   June 2, 2015   ‘A blog where attention span really matters’!

Throughout the 1960’s, there was consistent reference by governments and defense sectors’ about MAD (mutually assured destruction), i.e., each side possessing sufficient nuclear ‘mega-tonnage’ to assure mutual destruction of the other, should war breakout.

A similar analogy is evident today, but its origins do not lie in the delivery of nuclear weapons rather in the delivery of massive cyber attacks designed to simultaneously take down and/or substantially disrupt multiple pillars of a targeted countries’ infrastructure, ala MAD – ‘mutually assured (sector, grid) disruption’!

On the morning of September 11, 2001, I and countless others presumed the aircraft strikes in New York and Washington were diversionary, as tragic as they were, to be followed by massive cross sector cyber attacks. My anger and curiosity that a cyber attack was imminent prompted me to call acquaintances employed in various sectors throughout the U.S., one of which was the director of a top tier research university’s ‘super-computing’ center. My rationale was that a super-computing center would likely be an initial point of detection to a larger cyber attack should there be one in the offing. To my disillusionment, such a rationale was in error, at least in this instance.

The capability to thwart, mitigate, or contain the asymmetric and adverse cascading effects that a coordinated cyber attack would likely be designed to produce presents obvious challenges and creeping costs insofar as companies and organizations keeping pace with the infinite risks and threats which can seemingly materialize anytime and anyplace with no vapor trail, to maximize the intended infrastructure disruption and chaos.

I suspect there are management teams, c-suites, and boards, ranging from Fortune ranked firms to SME’s (small, medium enterprises), which have already engaged in discussions regarding the practicalities and costs of continuing to deploy state-of-the-art cyber attack – risk mitigation (data-information security) products.

There are two related reasons why I believe such discussions are inevitable…

  • it is a globally universal and irreversible economic fact that rising percentages, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from intangible assets, primarily in the form of intellectual, structural, relationship-social and competivity capital.
  • data/information generation, storage, and retrieval needs are continually ratcheting up to the mega-terabyte arena, particularly with the rapid recognition and rise of intangible asset intensive and dependant companies.

To be sure, efforts to thwart the actions of the growing global array of ultra-sophisticated economic and competitive advantage adversaries and legacy free players engaged in hacking and/or state sponsored entities capable of delivering massive cyber attacks are challenges which, at this juncture, cannot be dismissed or relegated to the uninitiated.

I am not suggesting companies disregard their fiduciary responsibilities or regulatory mandates.  Instead, I am suggesting a company’s desire to curtail the rising costs and operational disruptions associated with investing and deploying all-the-more nuanced IT security products that deliver consistent and measurable returns, technologies must be developed with capabilities to differentiate company information and data on a variable continuum. For example, introducing the capability to differentiate data-information that should receive the maximum safeguards, which initially I propose, encompass these four factors, i.e., the (intangible) assets…

  1. contributory value to a particular project, product, and/or the company’s mission.
  2. continued materiality to a particular project, product, and/or the company’s mission.
  3. relevance to a company’s reputation (image, goodwill, brand) etc.

Cyber Crime and Economic Espionage Assessing Costs and Economic Impacts…

August 11th, 2014. Published under Economic Espionage, Intangible asset protection, Intangible Asset Value. No Comments.

Michael D. Moberly    August 11, 2014    ‘A long form blog where attention span really matters.’

Objective calculation of losses and costs.

Calculating and assigning a dollar value to losses and costs associated with cyber crimes, particularly those which culminate in economic espionage, may appear at first blush to be relatively straightforward tasks. However, when intellectual properties and other categories of intangible assets are targeted and acquired by economic and competitive advantage adversaries, the legitimate holder of those assets is obliged to objectively assess their value?

Similarly, if a cyber attack temporarily brings down a company’s IT network, the targeted company is obliged to objectively calculate losses to productivity, sales, and essential communications as well as costs to return their system to operational normalcy with the necessart security upgrades.  Obviously, there is much more to calculating and assigning a dollar values to such costs/losses than engaging in more guesstimates.

No surprises.

For regular readers, it should come as no surprise that there are significant differences of opinion globally about calculating the costs and losses attributed to malicious cyber activity and economic espionage directed to companies’ R&D, university-corporate research consortiums, etc. As conveyed in previous posts at this blog, dollar value losses cited in numerous respected surveys and studies range from a mere few billion dollars to hundreds of billion dollars annually. To be sure, assigning specific price tags to companies’ cyber – economic espionage losses is challenging, but too, the processes are often embedded with subjective assessments that do not reflect a comprehensive accounting of the peripheral and contributory value of each of the other intangible assets underlying a patent for example. So, it may not be especially prudent to assume the findings of the various surveys and studies have been reached using objective data or calculations that are free from the influence of larger political, social, and national security agendas. This may be a reason why we are witnessing such a broad range of loss estimates regarding cyber – economic espionage.

Is economic-cyber the greatest transfer of wealth in history or merely a rounding error?

While I am not the originator of the above question, there are numerous responsible parties that do characterize losses attributed to cybercrime and economic espionage in this fashion, i.e., as constituting either the greatest transfer of wealth in human history, or merely as rounding errors in a $14 trillion dollar economy?

The former of course represents a perspective intended to elevate the significance and adverse impact of cybercrime-economic espionage, while the latter represents an opposite perspective which is to diminish the ‘sticker shock’ if you will, of the adverse impact by characterizing it in the context of what is to most as incomprehensible dollar amounts or collective national GDP’s.

Having said that, both perspectives, through my lens, warrant inclusion in the broader conversation.

Numerous reports…

Since the passage of the Economic Espionage Act (EEA) in October, 1996, there has been no shortage of surveys and studies launched whose focus has largely been to dramatize the costs, losses, along with an array of adverse (economic, competitive advantage) impacts attributed to acts of cybercrime and economic espionage and adversely effecting either or both the private sector or national security/defense.

Having read and studied most, if not each of these reports over the past 25+ years, I interpret the findings and supporting documentation to be somewhat competitive in the sense that each report strives to be conceptually broader and offer broader ranges of losses and impacts and in more dramatic fashion.

Too, many reports, particularly those published in recent years, are collaborative, in that a known and usually global player (i.e., accounting, consulting, or IT firm) has partnered with a prestigous university (academic unit) or ‘think tank’ assuming this will elevate the reports’ credence and validity in the eyes of its previously targeted audience. In addition, more such reports include examples and/or mini-case studies describing the impact to victimized companies and/or organizations, whom, for multiple reasons have elected to ‘go public’, perhaps at the behest of federal (EEA) prosecutors and thus agree to seek prosecution of the perpetrators, whomever or whatever they may be.

Expectations of receiving damage – loss restitution…

Any victim company’s expectations of receiving damage or restitution payments is slim and therefore are largely symbolic when that is the finding of a court. That’s because a large percentage of those engaged in and prosecuted for EEA-related violations have international origins, which, while within the EEA’s scope may also find it useful to bring such action before the World Trade Organization (WTO).

Factors in play that influence companies to go public…

Readers recognize of course, there are numerous factors in play that comprise a company’s decision to ‘go public’. Going public, represents among other things, a companies’ admission of being victimized followed by a guesstimated admission of the extent – value of the losses being attributed to the acts, which, initially are  often framed in passionate and angry guesstimates of how the acts and losses will impact the victims’ company and even who the culprit(s) may be and how the adverse act was actually committed.

Victim anger and passion aside, we know it is challenging to determine, let alone isolate and accurately assess such losses very rapidly. That’s because, in many instances, the losses are not limited solely to lost or undermined intellectual capital, i.e., trade secrets, proprietary information, and IP. Instead, the full extent of a targeted companies’ losses are frequently more strategic in the form of relationship capital and thus may not be fully realized for several months out.

Reputation risk factor…

Another factor in play with respect to the counsel and ultimate decision to ‘go public’ with a companies’ victimization is the very real possibility that having the matter come under public and regulatory scrutiny, there is, unfortunately, a probability the victim company, will experience the materialization of reputation risk manifesting at some level. I refer to materialization of reputation risk with the phrase  ‘at some level’, because such company specific reputation risks can manifest in different ways for different sets of consumers, stakeholders, and investors, etc.

Yes, a company’s reputation is an intangible asset of the first order. A company’s reputation is embedded with – comprised of many other contributing intangible assets which collectively produce significant value. In other words, reputation represents expectations, and therefore serves as the rationale in which consumers distinguish, seek, and likely purchase one product or service over another because it consistently meets or exceeds our expectations.

Calculating losses attributed to economic espionage require objectively framed equations…

For many years there has been a general inclination to accept, perhaps naively, the guesstimated findings of after-the-fact prognosticative research regarding losses – impacts attributed to cyber – economic espionage valuations. My counsel is that any formula, conventional intangible asset valuation methodology, and/or equation used to calculate the loss and/or compromise of valuable intellectual properties (intangible assets) caused by cyber-economic espionage should…

  • differentiate the assets which have been targeted, lost, and/or compromised by category, i.e., intellectual, structural, and relationship capital to ensure the findings
  • bring quantitative – qualitative distinctions and clarity to a fuller range of related acts/events which can materialize following an act of cyber-economic espionage, e.g., produce adverse stock market reactions if the targeted company is publicly traded, reputation risks, productivity losses, business disruptions, loss of consumer trust, expectations, and goodwill, as well as the costs required to re-establish IT and supply chain security, etc.

As always reader comments are welcome!

Intangible Asset Damages

July 14th, 2014. Published under Intangible asset protection, Intangible asset training for management teams., Intellectual capital management.. No Comments.

Michael D. Moberly     July 14, 2014    ‘A long form blog where attention span really matters’.

A not-so-hypothetical circumstance…

The following represents a not-so-hypothetical circumstance which I’m confident many readers have encountered. For me, as an intangible asset strategist and risk specialist, it represents one of the more consistent and disconcerting challenges insofar as safeguarding intangible assets, for which I have no one-size-fits-all answer. The hypothetical begins this way. I have been invited by Company A’s management team to conduct intangible asset awareness training and assess their intangible assets.

During the early stages of the engagement, it quickly becomes apparent that Company A has developed and utilizes company centric proprietary intellectual capital (know how) that delivers efficiencies and market – sector competitive advantages. However, as the engagement proceeds, it becomes even more apparent that the firms’ management team lacks sufficient operational familiarity with those and other particularly valuable intangible assets they have produced in terms of identifying, unraveling, assessing, distinguishing, utilizing, exploiting, and safeguarding, etc.

With respect to each of the latter, the company’s failure to recognize the contributory value, sources of revenue, and competitive advantages their specialized proprietary intellectual capital (intangible assets) are delivering represents an obvious breakdown in asset stewardship, oversight, and management. Fortunately, it is a breakdown that not only must, but usually can be remedied providing the value and functionality (life) cycle of the asset or assets remain relevant and durable.

In defense of management teams…

I should say in defense of management teams’ absence of operational familiarity with (their firms’) intangible assets, such circumstances, unfortunately, are relatively common. That is, countless companies globally have deeply embedded, in their routine business operations and processes, a myriad of intellectual, structural, and relationship capital and other forms of intangible assets which frequently, for lack of a better explanation, are taken for granted and therefore remain unacknowledged, undervalued, and thus, at risk.

So, the maximum contributory value, competitive advantages, and efficiencies these assets could deliver may remain un-exploited, if not idle, throughout their potential functionality – value cycle.  Importantly, under such circumstances, a company may never fully recognize the economic or competitive advantage benefits. An especially unfortunate element to this hypothetical is that a company management team may have no perspective for the importance or necessity to preserve (safeguard) the contributory value and competitive advantages the asset are delivering, and which the company has likely, but unknowingly, grown dependent.

Ex post facto trade secrecy requisites…

So, one important question is, can, or should this company’s proprietary intellectual capital as portrayed here, be cast (ex post facto) as trade secrets?  This of course, representing one strategy to help remedy the situation?  More specifically, can these intangibles meet the six requisites of trade secrecy (ex post facto) when in fact, the proprietary intellectual capital has not previously been recognized nor treated in a manner consistent with those criteria?  Nor are any procedures/practices in place to safeguard, i.e., preserve control, use, ownership, and monitor value, materiality and risk to those assets, i.e., infringement, theft, and/or compromise? Admittedly, I am doubtful.

A second, and equally important question is that if, not when, this particular proprietary intellectual capital is stolen, copied, or otherwise compromised, absent having any specific (trade secret requisites) safeguards in place, does Company A have grounds to mount a viable legal recourse in terms of seeking damages, assuming of course, the firm becomes sufficiently aware in a timely fashion that such adverse acts, i.e., the loss, theft, and/or compromise, have actually occurred?

The patent statute…

As articulated by Scott Hampton, Hampton IP and Economics, USC 35, 284, often referred to as the ‘patent statute’, states that patent infringement damages should be in an amount adequate to compensate the patent holder for the defendant’s infringement of the patent-at-issue.  But, in this hypothetical, Company A, the developer of the intangible assets, but previously unacknowledged user, has neither filed or been issued a patent, so this prospective remedy strategy seems, at best, very shaky, if not irrelevant.

Given my predilection that risks, i.e., theft, misappropriation, compromise, etc., to most intellectual capital assets will materialize with litigation promoted as the relevant strategy to try to regain control and use of the assets, plaintiffs will routinely endeavor to make a determination, usually early, as a element of the pre-litigation process, whether to seek lost profit – competitive advantage damages, or limit the remedies they are seeking to a reasonable royalty?  Again, its doubtful either are viable strategies for this particular hypothetical, but nevertheless, worth exploring.

Most companies do not go down the conventional intellectual property path…

It’s useful to recall at this point that today, globally speaking, it is an economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability either lie in – evolve directly from intangible assets of which conventional intellectual properties are merely one type or category of intangible asset.  However, a reasonably high, but realistically unknown percentage of companies with developed intellectual and structural capital assets presumably and purposefully opt out of the conventional intellectual property (patent) path due in large part no doubt to the expense.

So, the intent of this post is to bring clarity to the initial dilemma (question) in Company A’s hypothetical, that is, with its contributory value and efficiency – competitive advantage delivering intangible assets, can it be realistically be positioned (ex post facto) to legally seek monetary damages if key proprietary intellectual capital – structural were to be stolen or compromised when conventional intellectual properties, i.e., patents or trade secrets were not in place from the outset?

Panduit Corporation v. Stahlin Brothers Fibre Works, Inc.

Hampton points out, as we know, there is no single method for calculating lost (profit) damages, but the most common is a four-part test first recognized in 1978 in case of Panduit Corporation v. Stahlin Brothers Fibre Works, Inc.  According to the Panduit test, says Hampton, to obtain damages, the profit, in our  Company A hypothetical, a real patent owner must prove…

  • a demand exists for the (patented) product or presumably process, i.e., intellectual and structural capital.
  • there is an absence of acceptable (non-infringing) substitutes in the current market space.
  • there is sufficient manufacturing and marketing capacity to exploit that demand, and
  • with some reasonable precision, the amount of profit Company A would have made, had the adverse act not occurred.

Hampton also points out there are other means of proving lost profit damages in addition to the above Panduit test, such as measuring increases in the cost of product inputs.  Is it feasible then, for Company A to plausibly characterize the latter as costs related to the development (internally) or acquisition (externally) of other suitable (replacement) intellectual capital for that which had been misappropriated – comprised?

Please consider the following as a respectful call to action!  That is, for companies operating in the increasingly and irreversibly competitive and predatorial knowledge-based global economy where growing percentages of most company’s value, revenue, profitability, and sustainability are inextricably linked to the use and exploitation of their intangible assets, i.e., intellectual, relationship, and structural capital, most all of which are quite vulnerable when effective processes – procedures are not in place, i.e., (a.) to sustain – preserve asset control, use, ownership, value, and monitor their materiality and risk, and (b.) for asset stewardship, oversight, and management,

A special thanks to Scott Hampton, Hampton IP and Economics for the inspiration for this post at http://hamptonip.com

As always, reader comments are most welcome.

Economic Espionage Economic Consequences

July 12th, 2014. Published under Economic Espionage, Intangible asset protection. No Comments.

Michael D. Moberly    July 12, 2014     ‘A long form blog where attention span really matters’.

Economic Espionage Act of 1996…

I have been consistently engaged in studying, conducting investigative research, publishing, and consulting on a variety of ‘open source’ matters related to economic espionage beginning well in advance of the passage of the Economic Espionage Act in 1996. Admittedly, while my interest in economic espionage issues are broad based, having served fulltime in academia for 20+ years, much of my interest has been directed toward the targeting and victimization of university-based research and corporate-university research alliances by insiders, competitor intelligence, data miners, information brokers, and foreign (independent and state-corporate sponsored) entities, and now ‘legacy free players’.

A distinctive aspect of my work in this arena is that I began to characterize these entities as ‘economic and competitive advantage adversaries’ as a more relevant descriptor of…

  • the variants of economic espionage that exist today
  • the range of domestic and international parties engaged.

Admittedly, this descriptor reaches beyond the definitions (precise requisites) codified in the federal Economic Espionage Act (18 U.S.C. § 1831-1839) statute. Doing otherwise, in my judgment, is limiting, and does not begin to convey the currency, depth, and breadth of this persistent and extraordinarily predatorial risk.

Capturing diversity and methodology of global players…

Too, I believe the phrase ‘economic and competitive advantage adversaries’ better captures the diversity of global players in terms of what and why particular assets are targeted, adversary’s motivations, as well as a testament to the ‘layered methodologies’ which are challenging to unravel with respect to those actually engaged in the acquisition initiative and the ultimate and/or primary (end) beneficiary of the acquisition.

My intent for re-phrasing the time honored (economic espionage) language are that it…

  • brings greater relevance to businesses and companies and elevates their recognition that the theft or acquisition of their proprietary information, ala trade secrets, has many more dimensions and facets today compared to when the EEA became Federal law in October, 1996.
  • indicates the targets are not exclusively national security and/or defense related.

Ultra sophisticated data mining…

The product, i.e., intangible asset acquisition, analysis, and insight, etc., capable of being delivered to an end user(s) through the application of sophisticated and frequently ‘off the shelf’ data mining technologies by economic and competitive advantage adversaries today is phenomenal by any standard or metric.

Determining who the ultimate end user or beneficiary is…?

Of the countless global entities, independent operators, and legacy free players engaged in some aspect of business, competitive intelligence, and/or information brokering today whether it be legitimate or illegal, believe me, it’s not necessarily a simple task to identify precisely who the real end user (beneficiary) of the work product will be or actually is.

Absent knowing who the real beneficiary of any misappropriated – stolen information-based intangible assets is, understanding how such assets will (can) be used or applied, once acquired and delivered, particularly if there are dual-use features involved, is useful. Still it remains challenging to objectively quantify, in dollar terms, the adverse economic, including competitive advantage, reputation, market share, etc., consequences attributed to any single event or collective loss.

Economic and competitive advantage adversaries…

I do believe reframing conventional economic espionage activities in a context of ‘economic and competitive advantage adversaries’ has substantially greater relevance in today’s increasingly competitive, aggressive, predatorial, and winner-take-all global business transaction, R&D, and new product launch environments.

Too, as the global economies’ become increasingly intertwined, yet overwhelmingly dominated by highly valuable intangible assets, particularly intellectual, structural, and relationship capital, achieving most any economic and/or competitive advantage is all but sure to outweigh the relatively minimal risk associated with most targeting and intelligence collection-acquisition initiatives. In other words, it has become obvious to me and I’m sure others as well, that the significant potential benefits of securing an economic and/or competitive advantage in a specific market or industry sector exceeds, intellectually at least, most costs and/or risks.

To anyone paying more than passing attention to economic (cyber) espionage today, they should recognize the adverse activities described above, as evolving from primarily targeting defense and national security projects to an unrelenting, costly, and inevitable risk for most any (public-private) commercial entity, regardless of size or industry sector, in which valuable intangible assets are being produced and applied. It is the intellectual, structural, and relationship capital which have become the globally universal forms of currency, often with company and/or country specific application and relevance.

Extrapolating costs of economic espionage…

As for extrapolating the costs – losses of economic espionage (acts of economic and competitive advantage adversaries) to a single company or to an individual country’s economy, either as a whole or to a specific industry sector, such analysis comes with a host of challenges, not the least of which is the often subjective nature of the calculations which, it’s not unrealistic to assume, are embedded with various corporate, government, policy, and political agendas.

Interestingly, in the 25+ years that I, and numerous others, many of whom have become colleagues, have been examining and consulting in the economic espionage arena, there is little that I can readily point to insofar as objective methodologies to measure…

  • the specific damages and/or costs to a targeted/victim company.
  • how to specifically attribute –differentiate the source of those losses to acts of economic espionage, and then
  • extrapolate that data to either the U.S. or other country’s economy as a whole.

….aside from using the ‘contributory value’ approach.

Go fast, go hard, go global…

For example, the full range of economic – competitive advantage repercussions from a single incident/act of ‘economic espionage’ is challenging to fully grasp, in part due, I suggest, to the go fast, go hard, go global business transaction environment which most businesses now routinely function and the multitude of valuable intangible assets being produced.

Exacerbating this phenomena is the reality that a company’s awareness of trade secret – intangible asset theft or compromise seldom, in my experience, emerges immediately. Thus, its adverse economic – competitive advantage consequences to the victim company can only be objectively calculated if the consequences can be specifically attributable to an economic – competitive advantage event and should be done so in both strategic (long term) and near term contexts.

A rationale…

My rationale is that a single (stolen, misappropriated, compromised) trade secret and/or proprietary information (intangible asset) frequently involves multiple iterations and combinations of intellectual and structural capital being embedded which, in a strategic context, may be applicable to variety of products and/or services in different industry sectors.

It’s worth reminding readers of the globally universal economic fact, that today, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, competitive advantage, and sustainability lie in – evolved directly from intangible assets.

I am not suggesting that the loss, theft, or compromise of a single trade secret or intangible asset is immeasurable. Rather, I am suggesting that measuring the real economic loss to a company must include objective near and long term calculations which can only come, in my view, from recognizing that trade secrets (proprietary know how) can readily become embedded with not just one, but numerous (proprietary) intangible assets.

As always, your comments are appreciated at m.moberly@kpstrat.com

CSO’s Intangible Asset Strategists Risk Specialists

June 26th, 2014. Published under Intangible asset protection, Intangible asset strategy, Intangible Asset Value. 1 Comment.

 Michael D. Moberly    June 26, 2014    ‘A long form blog where attention span really matters’.

So, why are these intangible assets being targeted by economic – competitive advantage adversaries…?

Respectfully, let me re-draw readers’ attention to the various examples of intangible assets previously described (identified) and the fact that intellectual property are merely one type/category of intangible asset, albeit a prominent one.

So, why are intangible assets being targeted by global economic – competitive advantage adversaries?There are, in my judgment, multiple reasons why, which I’m confident experienced reader practitioners will find agreement, i.e.,

  • to appropriate the words of the 1970’s bank robber Willie Sutton, it’s because intangible assets are where 80+% of most company’s value, competitive advantages, and profitability originate and are ‘deposited’.
  • most intangible assets, once stolen, compromised, or infringed, can be used – applied in competing products and/or services as well as having the potential for being converted for use in unrelated products or services, in other words, they are often readily monetizable or comercializable, in the right hands.
  • there is a consistent and often global demand for one or multiple intangible assets like those described above, a demand which is relatively barrier free insofar as having numerous market entry points globally where intangible assets can be sold, bartered, exchanged, or melded into competing or other products or services, etc.

Role of corporate security…

A professional acquaintance, Mr. Greg Acton, served as Director of Global Security for a major telecom – consumer electronics’ company in California. The company had invested heavily in R&D over a period of 12 to 18 months on new and perhaps ‘game changing’ technologies to be incorporated into its long time staple, globally branded, and primary consumer product.

Upon embarking on this initiative, the company’s stock price was experiencing a consistent downward spiral, which, in many respects was due largely to numerous new and well financed competitors entering the market space coupled with the sense that this company’s product had not kept pace with newer, multi-functional technologies which consumers were readily embracing in other brands.

Without over dramatizing the circumstance, there was indeed a demoralizing sense of product – technology stagnation regarding the company’s staple product and the overall brand.

As is prudent with many electronics – telecom firms, this company had timed its R&D and product launch to coincide with the annual consumer electronics show in Las Vegas. This company, as many before it, believed a key to the success of a product’s launch, financially as well as regaining consumer confidence in its product, and by extension its brand, lie in part, in retaining a consumer teasing level of secrecy shrouded around its new product, which as readers recognize is quite common in this sector and perhaps perfected by Steve Jobs and Apple.

The tactical and strategic intent of this shroud of secrecy would be to secure domination, albeit perhaps fleeting, of the electronics show’s dynamics, coupled with the immediate commencement of a strong marketing blitz designed to breathe new and sustainable life into the company, its brand, and its products.

In this, as in many other similar circumstances, this company’s, Mr. Acton played a very significant role insofar as assuming substantial responsibilities for ensuring the company’s new product, it’s planning, technology supply chain, and prototypes literally remained devoid of any leakage throughout the almost two years of R&D and testing phases up to the precisely scheduled time and date of its well hyped public offering at the consumer electronics show.

In this instance, Mr. Acton, clearly a seasoned and well respected ‘silicon valley’ veteran understood the significance of his responsibilities to this product launch along with the extraordinary value of the numerous and contributing intangible assets, all of which would be in play, particularly, the company’s reputation, image, and consumer goodwill.

As I’m confident readers understand, the intangibles which Mr. Acton recognized and effectively oversaw and safeguarded throughout this 20+ month product development and testing period were conservatively worth multiple millions of dollars in potential sales to the company in addition to rejuvenating its reputation, market share, as well as favorably affecting the value of the company as a whole.

Had there been inadvertent or purposeful public leakage by an economic and/or competitive advantage adversary (internally, externally) about this product and its launch in advance of the consumer electronics show, it would have, among other things, allowed ample time for the ever present array of global technology critics and competing firms to mount consumer directed offensives against the product intended to minimize and/or undermine its improvements and consumer ‘likeability’, etc.

Much to the credit of Mr. Acton, there were absolutely no known advance (adverse) leakages. What’s more, the stock price of this publicly traded company shot up 312% by the close of business on the day of its highly public launch at the consumer electronics show. Another metric worth noting is that in addition to the aforementioned stock price gain, the company’s vice president of marketing informed Mr. Acton that the company had spent $1M on marketing the lead up and public announcement. In return for sustaining the product proprietary status, the company received an estimated fifty times that amount in product advertising, at no cost to the company, through the various and globally connected media portals in place at the consumer electronics show.

So what was the contributory value of this CSO’s commitment to ‘no leakage’…?

Perhaps first, and foremost, it laid the essential foundations for the company to fully capitalize and otherwise exploit its presence at the consumer electronics show which very rapidly converted to stock analysts and stock market share price favorables.

So, is this sufficient rationale for not only inviting, but ensuring CSO’s and other relevant security personnel are comfortably seated, with a voice, at the proverbial R&D table from the outset of an initiative, I believe it is!

CSO’s, in a new role as intangible asset strategist and risk specialist, working collaboratively and in unison with a company’s internal and/or external R&D unit and relevant and various supply chains, are uniquely positioned to recognize and differentiate the more valuable and competitive advantage driving elements of promising research. One way is by virtue of their proximity to and operational familiarity with the global expansion of economic and competitive advantage adversaries which are consistently motivated by nation state mandates or monetary remuneration to acquire other entities’ valuable intangible assets.

But what makes a CSO’s voice heard and duly considered…?

Again, first and probably foremost, are CSO’s receptivity to recognizing the relevance and importance of elevating their existing skill sets to acquiring an operational familiarity with their company’s intangible assets. In other words, acquire a level of operational proficiency with intangibles that provides CSO’s with the professional comfort associated with becoming an intangible asset strategist and risk specialist!

Straightforwardly, that would entail recognizing the strategic importance and necessity to develop and respectfully execute ‘under the radar’ practices and processes, all of which are designed to sustain control, use, ownership and monitor the value, materiality, and risk to select intangible assets, distinguished as having the most promising contributory value to a specific or multiple (on-going) proprietary (R&D) initiatives and/or projects along with the array of business transactions a company may regularly engage in which intangible are routinely in play.

This would include conducting (intangible asset) due diligence for such transactions as a merger, acquisition, strategic alliance, or other business activities in which intangible assets are routinely in play and integral to the favorable outcome of a deal.

Reader comments and inquires are always welcome at 314-440-3593 (St. Louis) or m.moberly@kpstrat.com

 

 

Real Targets of Cyber Economic Espionage Are Intangible Assets

June 25th, 2014. Published under Economic Espionage, Intangible asset protection, Intangible Asset Value. No Comments.

Michael D. Moberly     June 25, 2014    ‘A long form blog where attention span really matters’!

Mis-portraying what’s really being targeted…

Having been actively engaged in the intangible asset arena since the early 1990’s as an academic investigative researcher and now as an intangible asset strategist and risk specialist, I am hard pressed to understand why the administration, cabinet secretaries, corporate c-suites, and various ‘talking head’ pundits consistently portray the target(s) of global economic and cyber espionage as bein intellectual property, i.e., patents, trademarks, copyrights, etc.

My suspicions are that continuing to purposefully mis-portray these events as being exclusively related to intellectual property events, they are intended to elevate business and public awareness about by using a singularly simplistic phrase because officials presume the public is unable to understand the intricacies and distinctions of stolen – misappropriated information-based intangible assets delivered in other formats. So government officials and copy cat punditry continue to portray economic and cyber espionage and data/information mining with presumably the more understandable and common term of intellectual property.

A distinction without a difference…?

I urge readers not to characterize the above perspective as merely constituting a distinction without a difference. It is indeed much more. That is to say, a company’s intangible assets, e.g., intellectual, structural, and relationship capital which comprise the dominant sources of value, attractivity, and revenue that serve as the foundations to conventional intellectual properties are the real targets of economic – cyber espionage and data mining conducted by global economic and competitive advantage adversaries.

In other words, these know how-based assets are precisely what the economic – competitive advantage adversaries’ globally need, want, and therefore will aggressively and stealthily seek because, among other things, being successful in acquiring those categories of assets is the quickest route to global competitiveness and profitability.

Issued patents provide legal standing…

Yes, it is quite true that an issued patent provides holders with (legal) standing to bring criminal and/or civil action against alleged infringers and/or misappropriators. And yes, one requisite for a countries’ seeking World Trade Organization (WTO) membership is enacting a comprehensive (legal, enforcement) intellectual property regime.

I do hold great respect for those who are the recipient of an issued patent from their government, particularly for what the patent holder has deservedly achieved. A patent issuance certificate certainly warrants framing and hung on a wall of prominence for all to see and dutifully admire. But please, avoid assuming that an issued patent today constitutes an absolute and stand alone deterrent to would be infringers, i.e., economic and competitive advantage adversaries with the u know how underlying the patent is somehow magically safeguarded for the patents’ duration or its life-value-functionality cycle, whichever comes first.

The latter of course, is sometimes a business decision pure and simple, particularly in today’s globally aggressive, predatorial, winner-take-all, and go fast, go hard, go global business environment. So respectfully, any assumption that the issuance of a patent serves, in any way, as a specific deterrent to economic – competitive advantage adversaries or insiders inclined to misappropriate the assets along with the underlying know how represents not just wishful thinking, rather naïve, misguided, and certainly out-of-date thinking.

 Please consider this…

Why would an economic – competitive advantage adversary or data mining operation, information broker, or competitor intelligence engage in the risk of acquiring (stealing) a patent, i.e., usually its structural capital content, when issued patents (essentially the same information) will be published and are available online and posted in the public domain, the U.S. case, at the U.S. Patent and Trademark Office website?

The answer to that question lies, in my view, in pure economic competitiveness which translates as getting and doing what’s necessary to stay ahead of any and all competitors and rivals, be they a sector competitor, a regional competitor, or a national defense competitor country.

I purposefully belaboring this point to make these distinctions, i.e., after many years of investigative (business) research along the entire spectrum of economic and competitive advantage espionage, this issue goes directly to the heart of perhaps the most important question for security practitioners, which is…

how and which knowledge-based intangible assets originating with a company warrant higher level and more sophisticated safeguards and resilience planning?

The answer is quite clear. It is the intellectual, structural, and relationship capital categories of (intangible) assets that deliver the greatest contributory value to a company’s value, sources of revenue, and otherwise serve as essential ‘building blocks’ for company profitability, competitiveness, and sustainability.

But, perhaps most critical and troublesome to the holder – originator of valuable and competitive advantage driving intangible assets are three, generally irreversible, realities…

  • once gone, exclusive – proprietary knowledge and knowhow, will likely be gone forever!
  • seldom can an asset holders or companies fully recoup such losses.
  • knowledge-based (intangible) assets are often quickly and readily convertible for adaptation and exploitation however and whenever  the ultimate recipient or adversary wishes.

Let’s assume, for discussion sake, the targets of preference for a particular economic and competitive advantage adversary, data mining operation and/or information broker is some form, type, or category of intangible asset which can fill an immediate or strategic need or demand and therefore serve as a key component to a previously unsolved puzzle of the adversary.

I encourage readers not to dismiss this perspective as being fanciful or irrelevant. Instead, try ‘drilling down’ a bit, and examine each broad (intangible) asset category through a business competitive, value, and revenue lens, be it held by a company, university, or independent R&D environment. One outcome of this exercise is to recognize what type(s) of safeguards are necessary to fully preserve each assets’ value and potential monetization – commercialization properties for the duration of the assets’ respective life, contributory value, and functionality cycle. The reason, that’s precisely what matters most today and that’s what global adversaries are seeking to disrupt to their benefit.

Entangling Intangibles’ Tamara Plakalo   February, 2006. Managing Information Strategies. Australia.xamples of intangible assets…

The following are examples of intangible assets which I have adapted from two well respected and current sources, (a.) ‘The Intangible Asset Handbook: Maximizing Value From Intangible Assets’. Weston Anson. 2007. American Bar Association, and (b.) ‘Untangling Intangibles’ Tamara Plakalo   February, 2006. Managing Information Strategies. Australia.

  1. Internally developed (proprietary) software and software copyrights, automated databases, source code, enterprise solutions and custom applications…
  2. Marketing lyrics, jingles (music), promotional characters and devices, photographs and video, newsletters, advertising/marketing concepts, results of focus groups…
  3. Engineering and industrial (new plant, equipment) designs, engineering drawings (blueprints) and technical knowhow
  4. Customer – client communication platforms, including mailing lists, relationships, customer data bases and retrieval systems, special distribution channels, 1-800 numbers.
  5. Actionable competitor research and business intelligence, i.e., plans, intentions, capabilities…
  6. Real estate, zoning, construction permits, i.e., air, water, and mineral drilling-exploitation rights, right-of-way, easements, and building (expansion) plans/rights…location visual scenery – proximity to.
  7. Personnel training, i.e., proprietary manuals, operations, and processes.                                          
  8. Internet domain names, website design, B2B and e-commerce capabilities, web links, customer/client accessibility and use
  9. Corporate identity, brand, reputation, image, goodwill, names, trademarks, and logos
  10. Product and service warranties, trade dress, i.e., product shapes, color schemes, and packaging design/graphics and open purchase orders, order and/or product back log,
  11. Contracts – agreements which have a definable life and some form of exclusivity, e.g., supply, media, performance and pricing agreements, license and/or royalty agreements, advertising, construction, management, and/or service contracts, leases, operating and broadcast rights and licenses, route utilization, franchise agreements, subscription rights, futures contracts, co-branding agreements, endorsements, spokesperson contracts, venue naming rights…
  12. Intellectual property; patents, copyrights, trademarks, trade secrets, trade dress, trade name, service marks, mastheads, application, logo design
  13. Prior art search, flanker patents; patent applications, foreign patents, reprints, use/performance rights
  14. R&D, product research studies, formulas, processes and assembly data, and regulatory agency approval process-status
  15. Communication and cable rights and/or transmission rights, FCC licenses and/or certification, bandwidth
  16. Human resource issues, i.e., wage rates, union contracts, non-compete and non-disclosure agreements (if transferable)…
  17. Structural capital, i.e., the structures and processes a company develops or acquires and deploys to increase productivity and performance (business process/method patents)
  18. Human capital, i.e., the sum total of employees’ specialties, skills, attitudes, abilities, competencies along with their technical ‘know how’ documentation, i.e., lab notebooks, manuals, formulas, processes, and recipes (food, chemical formulas)

As always, reader comments and inquires are always welcome at 314-440-3593 (St. Louis) or m.moberly@kpstrat.com

Cyber – Economic Espionage Intangible Assets Are The Real Targets

June 24th, 2014. Published under Economic Espionage, Intangible asset protection. No Comments.

Michael D. Moberly      June 24, 2014      ‘A long form blog where attention span really matters’.

The knowledge – intangible asset era, paradigm shift…

Growing numbers of companies and organizations are seeing steadily rising percentages of their value, sources of revenue, and ‘building blocks’ for profitability, sustainability, and growth evolve directly from intangible assets produced either internally or acquired externally.  Today, that percentage consistently hovers at 80+%. As readers recognize, there are numerous variables to this global economic paradigm shift, e.g.,

  • companies’ are more dependant on the development, application, and exploitation of their knowhow which materializes as intellectual, structural, and relationship capital, i.e., intangible assets.
  • intangible assets have surpassed tangible – physical assets, i.e., buildings, equipment, inventory, property, etc., as companies’ overwhelmingly dominant source of value and revenue.

Beginning in the late 1980’s, I was fortunate to become one the early thought leaders actively engaged in the intangible asset arena, initially as an investigative academic researcher, and now as a practitioner.

Still reluctance among company management teams and c-suites…

Unfortunately, there remains considerable reluctance regarding the whole ‘intangible asset thing’! Much of the reluctance is influenced by managerial past practice embedded in pre-knowledge era industry standards and statutes (accounting, legal, etc.) which, in many instances, have morphed into ideological and professional discipline ‘turf protection’. Collectively, each poses unique challenges to rationally refute for those committed to – satisfied with past practice, regardless of the availability of objective studies that demonstrate the irreversibility of business and industry globally being dominated by intangible assets.

Through my lens, there is an analogy here to the persistent global warming debate. That is, despite overwhelming scientific and visual evidence of its existence and consequences, there remain sufficient numbers of doubters and/or deniers who, irrespective of their motivation, achieve a public stage from which to express dispiriting and misguided messages. Such circumstances exist in the intangible asset arena.

I have the opportunity to engage countless business decision makers and their supporting professional service disciplines, i.e., accounting, law, and financial services particularly because their persistent and dismissive questioning of intangibles’ value, utilization, and exploitation is the most apparent. Respectfully, I don’t believe these disciplines are actually denying the existence of intangible assets, but their expressions remain aligned with conventional thought and practice leaving little time or room to objectively consider current realities.

It’s quite clear that each discipline specific objection evolve around challenges associated with intangible asset valuation and how or whether intangibles are to be reported on company financial statements and balance sheets. This makes numerous company management teams, c-suites, and boards retain attitudinally hesitance – resistant) to making the necessary managerial transition which includes fully engaging their intangible (non-physical) assets.

No global precedent…

Admittedly, there is no precedent for what’s occurring today, i.e., international business and country economies’ being overwhelmingly dominated, economically and competitively by intangible assets. And, unlike most tangible (physical) assets, intangibles’ require consistent stewardship, oversight, management, and monitoring of fluctuations in the value and competitive advantage they deliver and the risks which render them vulnerable.

Risk…

There are various acts, behaviors, and/or events, many of which are asymmetric, that collectively create fertile ground for risks and threats to materialize and cause a company’s  (intangible) assets to experience declines in value and sources of revenue, or become competitively undermined which can have adverse bearing on company reputation and goodwill. In numerous instances such adverse circumstances are attributable to the surreptitious and purposeful activities of global economic and competitive advantage adversaries.  That’s because increasingly higher percentages of company value and revenue lie in – evolve directly from intangible assets prompting economic – cyber espionage to emerge in ways that are more calculating, stealthy, and designed to target specific, usually ‘knowhow’ assets which, when lost or stolen, cause far more immediate and irreversible damage-harm (economically, competitively) to a company than their tangible (physical) asset predecessors.

It should be to no one’s surprise that economic and competitive advantage adversaries are really targeting intangible assets…

Willie Sutton, a notorious bank robber during the 1970’s, is alleged to have responded to the question ‘why do you rob banks’?, by saying, ‘it’s because that’s where the money is’!

Similarly, I urge companies, particularly those with intensive portfolio’s of valuable proprietary information, trade secrets, and other forms of intangible assets to recognize, as they engage in business transactions, strategic alliances, and technology transfers, etc., it is all but certain those intangibles assets will be in play.

Experience clearly suggests that when certain, particularly lucrative intangible assets are in play, they will be targeted by an economic and competitive advantage adversary. Examples of this, which I have examined for many years, are university research and corporate R&D units, which in most instances are repositories of potentially valuable and competitive advantage intangible assets. As noted previously, this includes specific categories of ‘knowhow’ that exist as intellectual and structural capital primarily which global economic and competitive advantage adversaries, whomever they may be on any given day or future time frame, want and/or need, and are quite willing to assume risk to achieve their acquisition using various methodologies and tradecraft.

So, it should be to no one’s surprise that the most frequently targeted asset today are intangibles’, and the risk predominates from the growing global array of economic – cyber espionage players, be they state or corporate sponsored or individual brokers, data miners, or legacy free players.

Admittedly, evidence to support this contention are largely anecdotal, but it stands to reason, like Willie Sutton’s remark ‘I rob banks because that’s where the money is’, the economic fact that 80+% of most companies value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability globally lie in intangible assets, the economic and competitive advantage adversaries of the world are targeting intangible assets. The reason, like Mr. Sutton, it’s because specific – select intangibles are the greatest sources of value and competitive advantage others covet the most.

It’s not all about national defense and security…

I can think of few better ways to portray this more succinctly than to refer to a conversation I had several years ago with a senior government official representing a county’s interior ministry who expressed a genuine need for agricultural knowhow to render very low crop yield land into high crop yield producing land. This official said, in very matter of fact terms, referring to U.S. superiority in agricultural science, ‘you have something I need and want to properly feed my people now, and I shall endeavor to obtain it through whatever means are at my disposal’.

My interpretation of the official’s provocative statement left me with no doubt that…

he understood the quickest and least expensive path to achieve this ‘utilitarian’ objective was not by his government taking time to gear up and fund the necessary R&D internally, or engage in a covenant filled and potentially risky and intrusive strategic alliance with a private corporation based outside his country, either of which would be a long term, 2-3 years out, undertaking before progress, of a sufficient scale, would likely materialize. Instead, this individual, and countless others globally, share precisely the same view and are intent on acquiring the necessary knowhow by utilizing other means at their disposal.

A real example, but…

I respectfully ask readers not to interpret the above example, as real as it is, as being wholly representative of the global economic – cyber espionage arena, other than recognizing it as one critical reality – consequence of knowledge – intangible asset based global economies, i.e., ‘you have something I want and need and I shall attempt to appropriate it or copy it without incurring the time and expense of independent origination’.

It is my contention then, that seldom are economic – competitive advantage adversaries’ actually seeking-stealing conventional intellectual properties, i.e., patents particularly. Instead, it’s the intellectual, structural, and relationship capital (intangible assets) embedded in and otherwise underlying the valuable proprietary information and trade secrets which have become the real targets. In other words, it is simply a misnomer to state intellectual properties are being targeted, stolen, or otherwise misappropriated.

As always I welcome readers comments and perspectives at m.moberly@kpstrat.com in St. Louis!

Intangible Assets Not Renewable Resources

June 2nd, 2014. Published under Fiduciary Responsibility, Intangible asset protection, Intellectual Property Rights, Organizational resilience and business continuity/conti. No Comments.

Michael D. Moberly   June 2, 2014   ‘A long form blog where attention span really matters’.

Pat Choate, in his 2005 book titled ‘Hot Property: The Stealing of Ideas in an Age of Globalization’ (p. 218)points out that an ‘idea, by definition, exists solely in one’s mind, where it remains happily and comfortably secure, but not terribly useful’. So, in order for an idea to potentially produce commercial and/or contributory value to its holder at some point, it must be expressed. Even though Choate (2005) says ‘protecting one’s ideas represents a basic social contract between society, its government, and the individual(s) who created the idea’, the act of openly expressing ideas, with increasing frequency, serves as a starting point for asset vulnerabilities and potential challenges and disputes to emerge for the originators (holders – owners) of the ideas.

Fundamentally, products of the mind are a type of intangible asset and manifest as intellectual, structural, and relationship capital including intellectual property (IP) and some other forms of proprietary information. Risks, to these intangibles materialize with some regularity and certainty, often in the form of purposeful or inadvertent events, acts, or behaviors that can adversely affect or jeopardize (asset) ownership, control, use, and value. A significant percentage of materialized intangible asset risks are of a nature to adversely affect a company’s reputation and its competitive advantages with equal rapidity, for example…

  • stifle competitive – economic momentum of a company project, new venture, or product launch.
  • undermine a business transaction or strategic business plan.
  • erode an assets’ value as a source of potential value and projected profitability.

Business continuity – contingency planning pre-Internet era…

In the pre-Internet era, when intangible asset were barely a twinkle in economists’ eyes, misappropriation, infringement, and/or counterfeiting was characterized as being relevant almost exclusively to IP, i.e., patents, trademarks, copyrights, and trade secrets. Too, at the time, a relatively common risk mitigation strategy (to a company’s assets) was business continuity – contingency planning, not organizational resilience, and was generally designed – intended to be a mechanism to contain the risk(s) and mitigate their impact, i.e., the damages or extent of the losses as well as additional adverse impacts to company reputation, image, and goodwill, etc.

Today however, in the current knowledge based (intangible asset) era of going fast, going hard, and going global, even the most well-intentioned and wishful thinking efforts to contain the multitude of risks that can materialize is more fitting, in my view, to tangible (physical) assets than intangible (non-physical) assets.

For example, in the world of physical (tangible) assets, so-called firewalls erected between apartment buildings are designed – intended to contain or reduce, for a certain period of time, the probability that a fire in one building will spread to adjacent buildings and/or structures.

Such conventional firewalls however are less relevant or practical insofar as safeguarding or mitigating risks to knowledge-based intangible (non-physical) assets which again include intellectual, structural, and relationship capital, IP and proprietary information. In most instances, in today’s increasingly sophisticated risk laden R&D and business transaction environments, anyone of these types of intangible assets, absent effective asset monitoring and safeguards, will be at risk. Unfortunately, the sophisticated methodologies applied by the expanding number of global economic and/or competitive advantage adversaries, allow value laden intangible assets to be quickly discerned and instantaneously disseminated to a growing and often organized and sophisticated labyrinth of information brokers, business intelligence operations.

Don’t Overlook Intangible Asset Safeguards

Significantly, once an intangible asset has been compromised or succumbed to the growing array of sophisticated and asymmetric risks and threats, a company mitigation practice based primarily on the principles of containment, in my view, is neither a realistic or viable (standalone) strategy, certainly not something which a company’s management team, c-suite, board should feel comfortable insofar as their fiduciary responsibilities are concerned, i.e., see Stone v. Ritter.

Thus, while conventional intellectual property enforcement mechanisms (i.e., patents, trademarks, copyrights, trade secrets) remain a global (WTO) requisites for conveying ownership and standing to address the inevitable disputes, challenges, risks, and threats, the deterrence features associated with each have been minimized and are routinely disregarded and circumvented by adversaries. Thus conventional IP enforcements assume a more reactive vs. proactive posture, one that requires formidable and consistent self-policing and monitoring

In today’s increasingly aggressive, predatorial, and ‘winner take all’ global R&D and business transaction environment, this leaves, in my view, conventional forms of intellectual property (enforcement) certainly less relevant, perhaps even approaching some manner of obsolescence insofar as effectively combating the ultra-sophisticated risks and threats which are now routine.

Conventional IP enforcements carry little, if any, deterrent features today…

While I am not suggesting conventional IP enforcements should not be used, the harsh reality is, the once respected rights and protections afforded to innovators and entrepreneurs for their products on the mind, through patents, trademarks, and copyrights, etc., are now being routinely outpaced, circumvented, and utterly disregarded by adversaries globally. Any entrepreneur or company who assumes the mere issuance of a patent, standing alone, will be sufficient to sustain full control, use, and ownership rights for the duration of their patent, for example, is simply no longer credible.

The notion that conventional IP enforcements will ensure indeterminate control, use, and receipt of economic/competitive advantage benefits from an individual’s or company’s hard earned and often very expensive know how, i.e., the intellectual, structural, and relationship capital is unfortunately a business risk that should not be assumed is the exclusive bastion of legal (IP) counsel.

It would not be too challenging to argue conventional intellectual property enforcements carry less benefit to a single holder or a company, aside from providing legal standing in the increasing likelihood of having to engage in litigation over disputes and challenges. It’s most prudent then for business decision makers to ensure best practice intangible asset safeguards are in place from the outset of idea materialization. This includes consistent asset monitoring and defense, not merely directed to the conventional intellectual property rights, but also to sustaining control, use, ownership, and monitoring value and risks to those assets!

Sustaining a successful launch – commercialization of a new idea…

There are many different views about what is actually required to sustain a successful launch – commercialization of a new idea or project.

Obviously, having a very commercializable product and a sufficiently capitalized business plan and marketing strategy represent three time honored ingredients necessary for most successful launches. But, an often overlooked, underestimated, and misunderstood ingredient to a successful business – idea launch is recognizing that…

80+% of the value, sources of revenue, and future wealth creation of the launch will likely evolve from intertwined combinations of (a.) intangible assets and IP,i.e., intellectual capital, and (b.) specialized proprietary know how, i.e., structural capital, and (c.) attractive and distinctive competitive advantages, and brand integrity, i.e., relationship capital. (Moberly, 2011)

So, unlike conventional forms of IP enforcements, i.e., patents, trademarks, and copyrights, no government will issue a comparable certificate that says, these are your contributory value intangible assets, proprietary know how, trade secrets, competitive advantages, and brand integrity which an individual or company should safeguard and monitor their value and risk for the duration of their respective value and functionality cycle.

The responsibility for (a.) recognizing how the intangible assets evolved, (b.) the context which they now exist and are being applied, and (c.) unraveling them (individually – collectively) to assess their contributory value and potential conversion to sources of revenue and competitive advantage lie solely with the launching companies’ decision makers, i.e., originators, holders, and/or owners of those assets.

Admittedly, today’s hyper-competitive global business (transaction) environment, is influencing more companies to recognize the necessity for more than cursory intangible asset identification, assessment, safeguards, and monitoring of value and risk is much more than a time or resource permitting responsibility. These responsibilities are now instrumental in the initial success of product launches. Business decision makers who carelessly or unwittingly hedge their intangible assets’ essential maintenance, e.g., protection and preservation, will with greater frequency, if not certainty, cause risk-threat probabilities to become inevitabilities in which complete or partial (asset) value erosion and/or dilution are likely to occur which can also inadvertently create parameters and/or boundaries to a company’s economic – competitive position capabilities and potential.

What can companies do if – when their intangible asset ‘genies get out of their bottle prematurely…

The genie for profitable and sustainable launches of a new company, product, or idea is embedded in the business decision makers’ recognition that…

Getting out of the bottle is a metaphor of course, for situations in which business decision makers overlook or underestimate the role, contribution, and/or value intangible assets make to the overall sustainability of successful business launches and equally important, the risks-threats to those assets.

The initial requisite to commencing asset recovery action is recognizing delays in (a.) discovering the materialization of asset risk, and (b.) securing experienced guidance about what action to take and when, will most certainly complicate and weaken a company’s (legal) position insofar as the possibility of achieving a favorable (possibly full) economic – competitive advantage outcome.

A responsive and thorough ‘intangible asset – competitive advantage assessment’ is a prudent first step. A specialized (asset) assessment of this nature will aid a company and its decision makers to be better positioned to deliberate on two important points:

  1. prioritize options relative to trying to (re-) establish ownership control and use of the no doubt already hemorrhaging intangibles.
  2. strategies to try to stop and/or mitigate additional economic – competitive advantage hemorrhaging (of the assets), i.e., devaluation, undermining, infringement, misappropriation, reputation risk, etc.

Bottom line; risks-threats to a company’s intangible assets, intellectual property, proprietary know how and competitive advantages and brand integrity should not be dismissed and/or characterized as merely just another risk of doing business!

Unfortunately, far too many companies lose, inadvertently relinquish, and/or become entangled in extraordinarily costly and time consuming legal disputes and challenges over the ownership, control, use, and value of their intangible assets, competitive advantages, proprietary know how, reputation, and brand integrity. One of the most frequent reasons is dismissing the real, persistent and stealthy risks-threats to those assets and their contributory value to strategic sustainability.