Michael D. Moberly, Principal, Founder, kpstrat

They’re stealing our intellectual property…is unfortunately, a warranted and all-to-routine phrase uttered by business leaders globally…

• rooted, to be sure, in costly, embarrassing, often irreversible and almost always, momentum stifling realities experienced by companies – institutions irrespective of sector which develop – hold proprietary intangible assets,
  • ala intellectual property (IP) and various other forms, contexts, and applications of revenue generating and competitive advantage delivering structural, relationship, and cultural capital targeted by cyber – economic espionage and ransomware criminals.

They’re stealing our intellectual property…

1. reflects known outcomes of law enforcement Economic Espionage Act investigations, particularly since the EEA’s passage in 1996 (USC 1831, 1832).  

• applies to businesses, companies, institutions, irrespective of sector, size, maturation, revenues, products, services, or IP position.

• translates (all-too-often) as (business, company, R&D, etc.) experiencing destabilizing economic losses to intangible assets held – owned and undermining of competitive advantage, reputation, and myriads of current – future revenue – value enhancers which are targeted by adversaries.

• is a phrase used by executive – legislative branches to influence policy initiation, direction, and future legislation and serve as a ‘talking point’ for arrays of political-ideological-experiential practitioners and pundits, perhaps more noisily between 2016 – 2020.

Recently though, leaders of G7 and NATO countries met, President Biden, et al, and variously renewed – publicly conveyed congruencies in economic – trade interests which encompassed recognition of partners’ ownership of IP and other proprietary intangible assets.

Prudent evidence of this materialized not unexpectedly, in three parallel ways during those meetings, e.g.,

1. addressed collective – bilateral efforts to essentially counter Russia and Chinas’ government (ideologically – politically) directed, supported, and continent and sector dominant initiatives and practices.
2. materialized as joint – public acknowledgements to end the multi-year ‘trade feud’ between Boeing (US) and Airbus (EU) and the subsequent tariffs which ‘the feud’ influenced, many of which adversely cascaded to other (business) sectors, products, and services (providers) in the affected (feuding) industries, governments, and countries.
3. acknowledgement (condemnation, mitigation) of the debilitating risks – challenges posed by cyber economic espionage and ransomware attacks originating in particular countries affecting portals to ‘national infrastructure’.

In this regard, businesses, their leadership and management teams (ala boards, investors, stakeholders, and influencers, etc.) expect and seek executive action, legislation, and resource allocation to investigate, prosecute, publicly admonish, sanction, and possibly thwart – deter (both) the wrongdoers and the beneficiaries (of stolen – misappropriated IP),

• irrespective of country or venue in which the criminal acts originate or the citizenship of the perpetrators, and
• without adverse – indeterminate disruption to their ‘relationship capital’ supply – value chains which are in place.

Its preferable that noisy statements by (government) executive – legislative branches, (condemning cyber-economic espionage and/or ransomware attacks) and subsequent threats of sanctions and/or tariffs’ etc., are uttered as political (test-the-water-temperature) preludes…

• for either body to recognize/accept as repeatable – broad credence, worthy of expending their personal, political, and an institutions’ capital) to deter – remedy the costly, momentum stifling, and reputation undermining realities and outcomes which these (types of) criminal acts intentionally deliver, variously at will.

Of course, similar noisy statements are often uttered (by design) so they may translate as ideologically plausible pleas and (talking point) rationales, e.g.,

criminal acts which lead to misappropriation of economic – competitive advantage and government actions, i.e., trade sanctions and/or tariffs, when same are likely – variously sponsored by and/or in collaboration with country – government – business sector adversaries at their will, translate to the targeted – victimized businesses as repeatedly ‘eating – undermining’ their (strategic business) lunch…

So, deciding on – imposing specific economic and/or trade sanctions – tariffs, etc., against a designated – originating offending party and its government, may be characterized in good-better-best contexts, if – when either can differentiate rationale for – outcomes of (various) sanction options relative to, among other things…

1. the passivity (noisy reluctance, denial) of the offending country leadership to acknowledge – assume some semblance of credible responsibility to deter – restrict such blatant criminal activities from originating within and being executed by parties within their borders.

2. clarifying – characterizing the offenses, the perpetrators, and country’s – government’s – leadership’s failings, etc., relative to the continuation – proliferation of same adversely affecting trade for all.

3. realistic descriptors of the desired outcomes (of particular – proposed trade sanctions – tariffs, etc., absent reliance on spewing (a country’s) economic ideology – government policies to an offending country, its government, or its leadership, ways which (fiduciarily) oblige same to undertake immediate actions-steps (with some modicum of verification) to deter – mitigate (additional) cyber economic espionage and/or ransomware attacks.

Ideally, if either of the above, or variations, could be argued with this intent, it could be a good thing, but, we probably ought not hold your breath.

Conventionally framed – applied trade sanctions can be relevant (initially, at least) insofar as accommodating the warranted outcries conveyed by already victimized businesses and their various stakeholders.

However, the various processes – steps to framing – executing a government (or business) policy, routinely carry and produce unintended, but usually foreseeable consequences and outcomes that, unfortunately…extend – prolong victims – businesses economic – competitive advantage pain and potential recovery.

• cascade into other businesses, sectors, products, services and supply – value chains, etc., e.g., agriculture,
• wherein a duly sanctioned – tariffed ‘culprit country (in response to an imposed tariff – sanction) will understandably, seek, negotiate, and procure (perhaps long term) comparable – same sources – supply chains for those commodities from other willing (perhaps antagonistic) suppliers – countries.
• which can effective put-further-at-risk (undermine) the ‘relationship – partner – supply chain (intangible) capital’ previously developed by (now) victimized businesses throughout that sector.

Thus, well-intended sanctions – tariffs can – may (in practice – through their execution) ‘cascadingly‘ inhibit – exacerbate – broaden domestic (free) trade, which in turn,

• influence the already victimized businesses and sectors (out-of-economic necessity and business sustainability) to more-aggressively-consider and perhaps pursue alternatives, i.e., seek – develop alternative (new) markets, trading partners, relationships, and supply – distribution chains, etc., that
• essentially end run the proposed – executed government (imposed) sanctions initiated in response to their business’s repeated victimization, i.e., theft – misappropriation of IP and other proprietary intangible assets and ransomware attacks, etc.
• this can include (lead to the palatability of) considering to leveraging (licensing, or otherwise transferring) remaining (untarnished) economic – competitive advantage (generating) intangible assets, i.e., branded products – services, etc.

Prudently, government and business leadership are obliged to consider how – whether the execution of any (variation) of the above (or other) may affect the (already, previously) victimized – undermined businesses…

• irrespective of ‘size’ (not only the Fortune-ranked)
• insofar as their ability – capability, and resilience to sustain the ($) value and competitiveness of its brand, reputation, and near – long term recovery in-the-midst-of-persistent business risk, and the
• potential for any business to emerge better positioned to recoup (already lost, devalued, undermined) competitive advantages (to their business things intangible) as contributors to and sources of revenue, and near-long term, and new) business development, transactions, and investment, opportunities, etc.,
• which again, may have been compromised, marginalized, and/or devalued, and undermined by criminal acts stemming from cyber economic espionage and/or ransomware attacks.

When either occur repeatedly and at the apparent will – timing of global economic – competitive advantage – (ideological) adversaries, it should translate, today, and going forward, as compelling drivers for business leaders, boards, investors, and stakeholders to prudently consider (ranges of) options.

The political desirability, immediacy of conventionally framed and presumed intended effects of (governments) considering – imposing trade sanctions and/or tariffs, is both understandable and unfortunate, but perhaps need not be limited by what some may assume are the-only-available ‘conventional – past practice ‘tool boxes’.

Preferably, each is obliged to consider – recognize, convention – past practice is less likely to modify – change (deter) perspectives – behaviors of ideological distinctive (economic) adversaries,

• however, leaders can seek – consider new, different (alternative) ways as to framing – executing a (business – government) reactions and responses,

• which can be and probably should be in ‘2021 contexts’ going forward.

• Especially when same can be directed to repeat offending countries – governments, and/or their noisy leadership.

Being receptive to considering – examining options to convention, some of which can be objectively less likely to extend – prolong – exacerbate already victimized business’s economic – competitive advantage recovery, is a good thing…

• aside, of course, to any understandable ‘just deserts’ (ala anticipated – intangible satisfactions) which may occur while already – previously victimized businesses await investigation outcomes to IP misappropriation – ransomware attacks, etc., and the actual imposition of a sanction and/or tariff.

• this can be especially significant to those businesses – sectors which are experiencing impairments of and downsides to their IP and other business things intangible, which they have invested time and resources to legally – ethically – legitimately develop, acquire, and apply, be misappropriated and used (absent the upfront cost) by an adversary.

Something for business leadership and management teams to consider, e.g., those who may exhibit go fast, go hard, wishful – risky thinking, i.e., presuming there was-is insufficient time and resources to apply (additional, real time) safeguards and risk mitigation to…

• their intellectual properties and other revenue generating and competitive advantage delivering intangible assets, i.e., various forms-contexts-applications of intellectual, structural, relationship capital and operating culture, etc.,
• at the outset and throughout their respective contributory role -and value cycles, to a business (product or service).

The above is especially relevant, if-when (the trade) sanctions (being considered) are presumed to (a.) penalize a country – government, and/or (b.) its’ particularly brazen government – business leaders, while…

1. presuming either hold – possess, the…will and/or unilateral capability to merely ‘flip a switch’ and, suddenly (upon threat of or imposition of sanction), and/or
2. misappropriation – infringement of IP (cyber economic espionage – ransomware attacks) will suddenly cease, and
3. perhaps not considering either and similar others, are likely generationally – ideologically – politically embedded as variously acceptable in that country’s business operating culture.

…in these circumstances the phrase, ‘that’s probably not gonna happen’ is apropos.

Let there be no doubt, some type of (trade related) sanction (consequence) imposed on a country – a government for

• purposeful (overt – covert) parties and the various beneficiaries (directly – indirectly) of those
• criminal acts, universally defined as economic espionage, be it a cyber intrusions and/or ransomware attacks, is warranted.

Respectfully, today, and going forward, government trade sanctioning bodies and their influencers are obliged to consider, frame, and execute (trade) sanctions imposed as a result of – consequence to criminal acts,

• but, with less deference to (beholden) to particular conventions and/or past practices.
• instead, we suggest here – now, should…
  • include acknowledgment of the globally interconnected, intertwined, and inter-intra-dependence of business development, relationship capital, and supply – value chains.
  • avoid becoming ‘hemmed in’ by dubious – debatable assumptions that today’s aggressively predatorial, keystroke speed, and competitive business development, transactions, and business capital investment realities, etc., can be readily mediated and/or deterred via convention alone.

Imposition of trade sanctions – tariffs, while understandable, and variously necessary, and perhaps politically expedient reactions…are likely predictable and variously infer…

1. ‘the tool kits’ of options for sanctioning bad-acting governments which violate recognized – legal (good faith) principles of (relatively free) trade’ should probably not be wholly limited by such conventions.
2. U.S. business’s (victims of economic espionage, etc.) are essentially, be (a.) unaware of – oblivious to, or (b.) passive acceptors of these criminal phenomena, and/or (c.) necessary ‘risks – costs’ of doing business globally,
3. with leaders wishfully presuming such criminal acts and (business propensity – asset vulnerability to same are exclusive to a particular ‘competitor – political adversary country, and its leadership.

such presumptions, at minimum, warrant objective and thoughtful review.

Experientially, leaders, administrations, and representatives who may choose to characterize these significant – costly issues (i.e., cyber economic espionage and ransomware attacks) as personalized – politicized paths to advocate for (possible, elusive) mitigation, e.g.,

1. the more impactful and economically troublesome (obvious, long standing) ‘trade imbalance’ between the U.S. and other countries, we suggest here,
2. misrepresents the ever-present – debilitating risks which are now fully – operationally embedded in most any endeavor to attract investment and develop – transact business,
3. especially the growing percentages of which are irreversibly intangible asset – IP reliant and dependent for their competitiveness, revenue generation capacity-potential, sustainability, and valuation.

Endeavoring to mix apples and oranges in hopes of producing grapes, seldom materialize as sustainable strategies.

At some point, we are obliged to consider the perspective that particular conventions and/or past practices cease – become limited insofar as their effectiveness, deterrence, and otherwise representing a singularly viable – sustainable strategy – policy (response – reaction) in 2021 and going forward,

• relative to today’s political – ideological complexities of globally interconnected and inter-twined trade and business transactions, some of which, necessarily, may be under-the-radar of government oversight.

Accordingly, as we suggest here…(more) business leaders are assuming (fiduciary) obligations to anticipate (plan for) and recognize (in advance) that…

• one countries’ interpretations, reactions, and options for sanctions to economic – competitive advantage (ideological – political) culprits and adversaries, will likely be met with

• various retaliatory (in kind – broader) tariffs and/or trade sanctions to imports, i.e., goods and/or services, despite the credence/validity of public outcries and investigatory – legal evidence of wrongdoing and the ‘country of origin’ of the wrongdoers.

Prudent (risk mitigation – averse) business leaders are obliged (we believe) to factor – consider the relevance of sanctions, irrespective of which country’s actions, behaviors, economic ideologies obviously served as precipitators, for these, and other, reasons, e.g.,

• once sanctions – tariffs have been imposed by one government upon another’s products and/or services,
• the manner in which same will (almost) inevitably cascade to other sectors, products, and services, etc.,
  • will likely broaden the pain and extend potential recovery and recuperation, and
• removing – lessening either, relative to the initial – causal circumstances,
• will likely materialize only if – when it is deemed politically palatable to do so,
  • perhaps years – technological generations after the initial economic – competitive advantage losses – damages to specific businesses – sectors materialized.

Also, with respect to influencers – deciders, if – when – which sanctions are being considered and potentially applied, there are obligations to recognize in advance that…

1. not all-of-the-adversely affected businesses, their leaders, stakeholders, and investors will necessarily,
2. self-impose (indeterminately) a presumptive obligation to remain ‘docilely – failingly static’ while awaiting sanctions to be lifted/removed at some unknown (politically palatable) point in the future.

Instead, government officials influencing which – when sanctions will be imposed, are (additionally) obliged to recognize…that a percentage of the (adversely) affected businesses and sectors (as a matter of business survival – sustainability) may adjust their (interpretation – pursuit of fiduciary) responsibilities, by being (more) receptive to …

1. various ways their business can ‘weather’ any (trade) sanctions, retaliatory or otherwise (including cascading effects),
2. executing tactical – strategic (scalable) ‘re-assessments – course corrections’ to their businesses offerings, products, services, content, production, delivery, inventories, marketing, and/or supply – distribution – value chains, etc., to
3. reflect not only the immediate – obvious (post sanction) circumstances and challenges, but also,
4. the probability of retaliatory actions vis-a-vis the availability of – opportunities to develop (near – long term) alternative global sourcing of comparables, in which,
5. the re-entry – return-to-operational (lucrative) normalcy ramps (upon lifting of sanctions) will very likely, have changed in the interim.

Over-the-horizon ‘sensing’ business leaders, et al, who recognize the indeterminate (often adverse, near term and strategic) effects to both sides of trade – tariff sanctions, are also obliged to be receptive to (a.) considering, and (b.) seeking ways and resources to (c.) be more operationally resilient going forward, e.g.,

1. re-imagine – adjust (their) business operability and strategic planning insofar as how and which options to apply and when relative to good – better – best strategies to more effectively weather – mitigate impending sanction – tariff storms, relative to…
2. projections (prognostications), and expenditures of time, resources, commitments – re-commitments, re-investments in and re-purposing – re-positioning – re-applying of existing structural, relationship, and competitive capital, primarily intangible assets, necessary to make it happen.

Let there be no doubt, lifting (trade) sanctions which have effectively (variously) impeded – restricted what most (universally) consider as constituting free trade…

• is considered to be a good thing by every business leader which I am familiar,
• yes, there are various cultural – ideological – political – historical manifestations – interpretations of same.

To be sure, the investments – risks – potential benefits, etc., of engaging in today’s predatorially aggressive and competitive global trade – transaction environments, most-all-of-which necessarily operate – function @ keystroke speed, carry numerous and persistent challenges and risks…

• one of which often overlooked and/or variously dismissed, is recognizing, differentiating, assessing, and safeguarding all business things intangible,
• which play contributory roles to business (product – service) value, competitive advantage, revenue generation potential, brand, reputation, resilience, and sustainability.

Necessarily then, many businesses resilience to sanctions – imposition of tariffs, etc.,

especially those which are intangible asset dependent and reliant, are

predicated on business leaders’ preparedness, receptivity, and capability (planned resiliency) to (relatively quickly) re-imagine and re-position their offerings, products, and services, and the underlying – contributing intangible assets for potential application to…

• new, additional, and perhaps different contexts, offerings, and markets, and
• lucratively, competitively, and – sustainably weather (good-better-best) the duration of trade tariff – sanction retaliatory storms.

Every business’s tangible + intangible assets (which I am familiar) are operationally – practically obliged to be receptive to be re-imagined, re-defined, converted, and re-committed elsewhere, and in other ways, when necessary, all-the-while recognizing that…

• returning to a presumed state of pre-sanction – pre-tariff operational – revenue generation normalcy, etc.,
• may not automatically nor rapidly occur as an unfamiliar – un-prepared leader – pundit may likely and rhetorically shout.

In 2021, and for the foreseeable future, business’ resilience + capacity to re-orient its business things intangible, absent costly – lengthy restructuring or re-branding (catch-up, ex post facto), represents a new ‘mission essential’ to leadership, management teams, investors, and stakeholders.

To be sure, endeavoring to achieving same, in present day (globally – irreversibly) competitive and aggressively predatorial circumstances, in which business’ vulnerability – probability to…

• experiencing debilitating, momentum stifling, and cascading (always on) risk is a worthy ‘mission essential obligation.

Readers of the ‘Business Intangible Asset Blog’ are invited to examine papers, books, and other blog posts available @  https://kpstrat.com/blog/