Intellectual Property Theft: An Overview On World IP Day

April 26, 2021

By a Biometrica staffer

Four out of every five small and medium-sized (SME) companies in the world suffer from counterfeits and brand abuse on the internet, a study by the anti-piracy and brand protection company Smart Protection found. The trend among cybercriminals now is to focus on SMEs that are usually more vulnerable than large companies, according to the study.

The World Intellectual Property Organization (WIPO) introduced World Intellectual Property Day in 2000 as an annual event to raise awareness about the role IP plays in encouraging innovation and in supporting economic, social and cultural development.

SMEs account for 90% of all companies worldwide and 70% of global employment, WIPO Director General Daren Tang said in a video message on April 26, 2021, describing them as the “unsung heroes” of the global economy and an engine for growth in a post-pandemic world. Tang, who took office as WIPO’s director general in October 2020, has made supporting smaller businesses a priority, according to a post in World Intellectual Property Review.

Image Source: Screengrab from the National Intellectual Property Rights Coordination Center’s Twitter handle

But, it’s not just SMEs, of course, who need IP protection and knowledge. IP theft in the form of counterfeit goods, trade secret theft, and pirated software costs the U.S. economy $225-$600 billion, a post on Legal Jobs said citing the Intellectual Property Commission estimates. That amounts to about 1% to 3% of the U.S.’s GDP, IP crimes statistics show, the post added. The average cost of a data breach in the U.S. is $8.64 million, while the average cost of defending a patent lawsuit exceeds $3 million.

So today, on World Intellectual Property Day, we give you an overview of IP theft, what it is, how it is defined by law enforcement in the U.S. and how they deal with it, and what they do to combat it.

What Is IP Theft? Why Protect IP At All?

To begin with, the FBI defines IP theft as one that: “Involves robbing people or companies of their ideas, inventions, and creative expressions— known as “intellectual property”—which can include everything from trade secrets and proprietary products and parts to movies, music, and software.” On its part, the FBI specifically focuses on the theft of trade secrets and infringements on products that can impact consumers’s health and safety, such as counterfeit aircraft, car, and electronic parts.

Why is it important to protect IP? The simple answer is if a climate of innovation has to prosper, then it matters. “Without protection of ideas, businesses and individuals would not reap the full benefits of their inventions and would focus less on research and development. Similarly, artists would not be fully compensated for their creations and cultural vitality would suffer as a result,” says STOPfakes.gov, a one-stop shop for U.S. government tools and resources on intellectual property rights (IPR). 

IPR protection and enforcement are critical to the success of U.S. businesses, including SMEs, and to the U.S. economy as a whole. IP intensive industries employ more than 55.7 million Americans, according to the U.S. Chamber of Commerce estimates, while the Small Business Administration estimates that SMEs alone employ half of Americans and account for 65% of new jobs, the STOPfakes.gov website says (Karen Mills, Administrator of the U.S. Small Business Administration (SBA), speech at ‘‘Jobs on Main Street, Customers Around the World’’ event hosted by USTR 01/21/10). While IP theft can pose a risk to any sector, those most commonly affected are: Manufacturing, consumer goods, technology, software, and biotechnology, including pharmaceuticals.

As a business, how do you prevent falling victim to IP thefts? In brief, step one would be to protect your IP, in the U.S. and in other countries where you may be doing business or sourcing from, according to STOPfakes.gov. Most IP rights are territorial. For instance a U.S. patent or trademark only provides protection in the United States. To be able to enforce your IP rights in other countries, you need to secure protection of that IP in those countries, often through registration. Next, you need to inventory your IP. Take a hard look and see what may qualify as requiring a patent, trademark, copyright or trade secret status. If you need help, check out this IPR online module from STOPfakes.gov.

Once you have an inventory, you can decide and review what you need to protect at home and abroad. Do some research on whether foreign export markets or sourcing locations you work with have signed patent or trademark agreements with the United States, and check if companies similar to yours have experienced IP problems abroad. Finally, you will need to do a cost/benefit analysis to figure out what kind of IP protection makes sense for your business.

How Do Law Enforcement Agencies Fight IP Theft?

The Department of Justice (DOJ), the National Intellectual Property Rights Coordination Center (NIPRCC), and the FBI jointly work on combatting these types of crimes. There are several operations that have been undertaken by the three agencies in the fight against IP theft. Here’s a quick look at some of them:

Operation Chain Reaction

This is an initiative by NIPRCC and targets counterfeit goods entering the supply chains of the Department of Defense (DoD) and other U.S. government agencies. It started in 2011 to combat the proliferation of counterfeit goods into the DoD and federal government supply chains. Chain Reaction was the first time NIPRCC participants collectively addressed the problem of counterfeit and misbranded items entering the federal supply chain. It combines the effort of 16 agencies, including Homeland Security Investigations (HSI) and Customs and Border Protection.

Operation Apothecary

Also an NIPRCC initiative, this targets the constantly-growing threat of online, or Internet, crime. This operation focuses on the use of the net as a primary means of communication and ordering of pharmaceuticals. Criminals, posing as legitimate pharmaceutical providers, advertise prescription grade drugs and/or inexpensive alternatives without requiring a valid prescription. The consumer purchases the pharmaceutical believing that the product advertised is legitimate. Often, the consumer is actually purchasing a counterfeit or unapproved version of the drug, which has often been manufactured in unsanitary conditions, or not subjected to any safeguards or quality control regimes.

Operation Engine Newity

This focuses on dealing with the issue of counterfeits in specific industries: Automotive, aerospace, rail, and heavy industry related components. These counterfeits are illegally imported and distributed throughout the country. “These counterfeit components represent a grave threat to public safety due to the critical nature of transportation-related applications and can include such components as airbags, brake pads, steering rods, and bearings. The faulty operation of these devices alone can cause bodily harm such as a counterfeit airbag, but in some cases can result in a catastrophic accident like an air crash or major train derailment,” the FBI website says.