Business Reaction to Theft of Their Intangible Assets and IP

Yes, investors, stakeholders, and employees may assume…contracts will be reneged, employees will be laid off, plant closures may occur, along with a very expensive downward spiral of stock price.

After all…valuable, competitive advantage producing intellectual property (IP) and other intangible assets have been stolen and infringed, trademarks counterfeited, along with proprietary information (trade secrets) put to use elsewhere, perhaps by competitors around the globe.

Yes, expressions of anger, frustration, disappointment…and the knowledge that years of diligent and costly work are gone, are often business leader’s initial public reaction. These reactions may be exacerbated if civil or criminal action is contemplated, irrespective of whether there are sufficient resources to pursue same to some desired legal conclusion. Even then, there is no assurance normalcy will ever be achieved.

Typically, when businesses experience such losses…they will (initially) try to (a.) understand how and why the loss(es) occurred, a motive, if you will, then, (b.) assess the near-term impacts – adverse effects, and (c.) examine other transactions or technology transfer being contemplated or already in some state of execution as to their vulnerability to risk.

Too, there is, what I refer to as, a period of reflection and contemplation…in which options and strategies are explored often with a far more cautious and cynical eye.  But, some options may still appear plausible providing, of course, ‘some of the company’s crown jewels’ remain variously intact.  Of course, there would have to be strong oversight and risk mitigation initiated, in hopes the company could be positioned to partially recuperate (economically, competitively, etc.) from the loss.

Doing either, can include, among other things…

  • exploring – pursing various legal strategies in conjunction with law enforcement entities who have institutional jurisdiction over such matters, if-when their is sufficient evidence a foreign government or state-sponsored entity was involved.
  • endeavor to engage in private negotiations with the suspected wrongdoers to try to recoup some portion of the monetary – competitive advantage loss that occurred, yes, there are companies which have tried this, seldom, if ever with positive results, and/or
  • restructuring future transactions – initiatives to mitigate future risks and avoid repetition, but this strategy would likely translate as having.

To understand the practicalities of these, and other options not stated, it’s prudent to examine previous cases brought under the Economic Espionage Actsimilar to last week’s U.S. District Court’s trial verdict (Southern District of Wisconsin).  This case was decided in favor of Massachusetts-based American Superconductor’s (AMSC) whose trade secreted wind turbine technology, i.e., source code, had been stolen, presumably, during-the course of their transaction with Sinovel, a Beijing, China-based business partner who, not-so-coincidentally, remains a wind turbine firm.

AMSC, not unlike other U.S. technology (intangible asset) intensive – dependent companies…upon learning they (too) had become victims of IP theft (infringement, misappropriation, etc.) approached this very serious and potentially (company) debilitating predicament with a typically conventional perspective, i.e., ‘let’s find the leaker’, which they presumed there was one.  Spoiler alert; their presumption proved true!

AMSC’s presumption the insider, ala company employee…

  • possessed the practical (working) knowledge of the trade secreted ‘source code’.
  • understood its role and how it optimized wind turbine functionality, and
  • had access to enable – facilitate its illegal transfer to Sinovel.

For 25+ years, I have been variously engaged in investigative research on a range of matters-issues related to economic espionage…and mitigating company’s – institution’s risks.  My work focused primarily on reducing vulnerability, probability, and criticality of – to theft (infringement, misappropriation) of IP and its underlying intangible assets, including product counterfeiting.

My work in this arena was largely achieved through extensive research, and…conducting respectful corporate – institution interviews and awareness training with special attention to,

  • risk origination (who, how, when) and
  • risk mitigation (what, why).

Interestingly, I am unaware of any U.S. company…which has been victimized, whose post-mortem obituary could not have legitimately included the following language, prominently chiseled on their soon to be forgotten ‘business dissolution’ headstone, following a circumstance not unlike what occurred to AMSC, e.g.,, ‘this was a company with a lot of promise’!

Such favorable eulogistic statements seem all-the-more-apt when-if the targeted (victim) company…is an  small, medium sized enterprise, i.e., SME, versus a Fortune-ranked firm, which presumably may better financially weather a comparable loss. For most SME’s however…such circumstances routinely produce not only economic – competitive advantage devastation, but layers of professional – personal frustration and embarrassment, that include implications of naïveté insofar how international business transactions – technology transfers were negotiated, executed, and the absence or shortfalls of effective risk mitigation.

To be sure, there are numerous instances in which companies negotiate successful…lucrative, and win-win transactions with foreign business partners in which their most valuable intangible assets are in play, but remain intact for the duration with no overt evidence of theft, misappropriation, and/or infringement of technology and operational knowhow.

Still, leadership (and employees) of companies which have experienced…significant loss-theft-infringement of strategically key intellectual properties and intangible assets, reactions are understandably emotion laden. Especially, as the financial realities emerge, often quite rapidly and irreversible – un-recoverable in market space repercussion contexts. Too, pursuing financial – competitive recovery are very costly and time-consuming options which most experienced in such matters assign minimal chances.

Michael D. Moberly April 17, 2018 St. Louis [email protected] ‘Business Intangible Asset Blog’ since May 2006 where one’s attention span, intangible assets, and solutions converge.

Readers are invited to explore other papers, books, and blog posts I have published at


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