The Brain Drain

Theft of Intellectual Property


This article is an edited excerpt from the Fraud Examiners Manual, Third Edition ©2000 Association of Certified Fraud Examiners, Austin, Texas  

Corporations are hungry for information. A majority of Fortune 500 companies have full-time staffs devoted to gathering intelligence information about competitors. It’s necessary to do so to keep up with changing technology and market demands. There are a growing number of businesses that discover information about a particular company or industry for a fee.

A substantial amount of information can be gathered about a company using entirely legal methods. Much more data can be gathered through illegal methods. Therefore, companies should have policies and procedures in place to protect against both legal and illegal intelligence gathering.

The Economic Espionage Act of 1996 makes the theft of trade secrets a federal criminal offense. The Department of Justice has sweeping authority to prosecute trade inside or outside the United States, and on the Internet.

Favorite targets

Some of the favorite targets of intelligence gatherers include research and development, marketing, manufacturing and production, and human resources departments.

Research and Development

One would think that R&D would be the most heavily guarded department in a company, but access to R&D information is surprisingly easy. R&D personnel are almost always in the flow of information. The open exchange of information is part of the nature of their job. They participate in conferences, attend trade shows, and work with academic institutions; however, at each of these functions, they leave themselves open for intelligence spies to listen, mingle, and ask questions.

Researchers who publish their findings in industry journals may inadvertently include details of a project on which they may be working. This is particularly true in the case of academic professionals who may be hired by a company to perform research or conduct a study. More than one company has been surprised to learn that the results of a supposedly confidential study were published in an academic journal. If an academician is hired to conduct research, make sure that he or she understands that the results are to be kept confidential. Also make sure that the use of teaching assistants or graduate students is kept to a minimum and that those individuals understand the confidentiality requirements.








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