What is IP theft? It's the stealing of intellectual property, designs, patents, code, and other intangible assets. IT theft is becoming more and more common and costly – and even small IT firms can end up embroiled in an IP theft lawsuit. But before we talk about the lawsuits, let's go over what IP theft is, who it targets, and how it affects small businesses.
IP theft can be committed by many people with various agendas. The Chinese government is one notorious perpetrator, and even has a special group of hackers who break into U.S. businesses to steal product designs and trade secrets.
Other IP theft comes from rival businesses looking for a competitive advantage or hackers looking to sell proprietary data.
A recent Seattle Times article argues that IP theft may be one of the biggest threats to the long-term health of the U.S. economy. If companies can't protect their inventions and ideas, they won't want to invest in new research and will be less competitive with foreign countries that are able to steal the ideas and produce the same products at cheaper costs.
How Much Does IP Theft Cost U.S. Businesses?
One of the reasons you don't hear people talk much about IP theft is because it's hard to quantify how much damage it causes. However, CIO magazine reports that $300 billion is lost by U.S. businesses every year due to IP theft.
That's a huge amount. But the cost is even higher when you take into consideration the side effects: many businesses must spend more money to protect their networks and shy away from spending on R&D.
What Do IT Companies Need to Know about IP Theft?
While IP theft often strikes big companies (known victims include Siemens, Cisco, and Motorola), the truth is that many hackers target small vendors in order to gain access to a larger firm's IP. This is where you, the small IT business, come into the picture. To help us better understand your role, let's look at how law firms can be exposed to this threat.
According to Bloomberg news, the FBI has been warning law firms for years that their private data is especially vulnerable to data breaches and hacks. A hacker might target a law firm knowing two things:
- It has important data on its network, including information about potential mergers, patent applications, and other key information.
- It has lower security standards than a big company.
This is where liability can fall on your IT business’s shoulders. Say you supply network administration for a law firm. If the network you design is hacked or software you've installed leads to a data breach, you can be sued.
But this risk applies to more than just law firms. Because a business employs many vendors, you're part of a web of liabilities. When a company like Target is attacked, it's often through a small side channel that hackers are able to gain access. Indeed, Target's hackers first attacked a contractor who worked on automating Target's air conditioning. From there, hackers were able to access Target's network.
Your clients could be hacked in order to gain access to the businesses they work for. This means you can end up being sued for IP theft that happens to a company your client works for.
How Small IT Businesses Can Protect Their IP Theft Liabilities
E&O Insurance protects IT businesses in the same way that Malpractice Insurance protects doctors. If you are sued over problems with your work, E&O Insurance can pay for your lawyer’s fees, the damages you owe your client, and other related costs.
Make sure to check out our IT insurance cost estimates to learn more about protecting your business.