Freely subscribe to our NEWSLETTER

Globalization, depending on who you talk to, has been either a powerful force for raising the living standard for many people the world over, or a scourge of mankind. Unfortunately, for manufacturers and many other businesses alike, it is no longer a choice. In order to be competitive, building relationships with partners in all parts of the world is now a necessity. Although many benefits accrue from such a strategy, potential risks have also emerged. One of the most urgent needs is to protect intellectual property from unintentional disclosure or deliberate theft.

In many parts of the world where manufacturing is now being undertaken, respect for intellectual property rights is in many respects, a foreign concept. For example, Intellectual Property Rights (IPR) were for many years non-existent in China. Although they joined the World Intellectual Property Organization in 1980, with laws drafted in 1982, they have not enforced any IP Laws until about ten years ago. It would not be surprising for the Chinese government to remain lax on enforcing laws that protect Intellectual Property. In fact, some regions of the country are substantially dependent on income from piracy. Therefore, despite pressures from the United States, the Chinese government is not likely to reverse this trend because of the impact it would have on local economies.

The near absence of intellectual property law enforcement in China has made it difficult for organizations in other parts of the world to conduct business with the country, for fear that ideas, patents, etc. would fall victim to IPR infringement. Of course this is not to say that IPR infringement is also not possible outside of China. One only has to look at last year’s incident between McLaren and Ferrari Formula 1 teams to know that intellectual property is at risk anywhere in the world.
Take the case of John J. O’Neil, the former Chief Executive Officer (CEO) of Business Engine Software Corp. (BES), who was sentenced in July, 2006, to 12 months and 1 day in prison. Mr. O’Neil admitted that he conspired with other executives from BES to illegally access a competitor’s computer network and applications repeatedly over a 10-month period.

These incidents are far more common than most people realize. The excellent CERT reports published by the Carnegie Mellon Software Engineering Institute and the US Secret Service, outline the most common reasons for an employee to carry out an act of espionage or sabotage. These invariably fall into two categories: financial and revenge. In some industries, the financial loss in over 30% of incidents cost the companies in question over $500,000.

With today’s global economy and expanding markets, innovation is crucial for maintaining a competitive position over companies from low cost countries such as India and China. Studies show that over 50% of revenue and profit are derived from new products. However, many companies are finding that innovation no longer resides within a single organization and new developments for a product often come from an array of sources. The second driver is the desire to keep costs to a minimum. This means finding the best value for money when seeking suppliers, which usually means looking outside your own country to lower cost ones, primarily found in East Asia. Also, it cannot be ignored that the majority of low cost suppliers are based in China. Along with obtaining suppliers from low cost countries to help reduce costs, finding an economical way to share the data is also important. The exchanging of files and data, whether hard copies or electronic, is something most companies struggle to reduce costs on, and when working with companies located in countries where IPR is not heavily enforced, like China, the need to execute this exchange in a secure manner becomes even more important

The question then arises for the IP owner: how does one protect IP assets while taking advantage of low cost manufacturing in such a situation?

In our information economy, the availability, integrity and confidentiality of data are fundamental to long-term corporate survival. Technology systems today are increasingly sophisticated and complex, with the result that they are potentially vulnerable to a fast-changing range of threats and tracking, and remediation of security breaches is expensive and highly labour intensive.

These problems are not restricted to intellectual property for new products or to manufacturing companies but all organisations, across all industries, whether public or private, all have highly confidential, sensitive information that has to be kept safe.

In fact any information which if leaked could cause embarrassment, bad press, litigation or could severely damage your reputation within your market and/or allow your competitors to gain a serious advantage.
But security breaches are not always the act of the hacker or disgruntled employee. A simple mistake can result in data being released to the wrong party, with no way of recovering the situation. A simple error can be just as distressing as the deliberate act, and as costly.

The embarrassment being suffered by the British Government caused by the loss of data relating to 25 million people living in the British Isles stored on 2 CD disks caused by a junior employee’s simple mistake is a perfect example.

So what can be done by companies to reduce the risk of vital information falling into the wrong hands, and protecting data that needs to be shared with people both inside and outside your organisation?

There are many solutions on the market at a range of prices. For most SMBs the ability to invest in substantial security infrastructures is limited. A 2007 Gartner report identified some key technologies as the biggest risks, USB devices, Mobile devices and Employees connecting through unmanaged networks. With the additional issue for manufacturing companies of trying to encrypt extremely complex data formats, such as 2D and 3D CAD formats. These are several orders of magnitude more complex than regular office documents.

However because of the ever increasing need, several software companies are trying to address this complex niche problem. This may just help western manufacturing companies compete in a global market.
Confucius once said that individuals gain wisdom in three ways: "First, by reflection, which is noblest; second, by imitation, which is easiest; and third by experience, which is the bitterest." The same might be applied in organisations. While businesses strive to reflect and pursue on achieving the heights of innovation for their company, it is important to secure intellectual property lest competitors achieve greater innovation through imitation of one’s ideas, causing a bitter experience that could have been prevented by ensuring that one’s intellectual property is secured.