BSA: Global software theft totaled $63.4 billion last year

Poor network security often to blame for intellectual property theft

Intellectual property theft is on the rise, according to the latest figures by the Business Software Alliance (BSA). Hackers that breach networks are able to steal intellectual property and other confidential data from the target enterprise.

To help companies reduce their security risks, the Information Security Forum (ISF) has released its Standard of Good Practice 2012, which provides practical advice on security strategy, incident management, business continuity, resilience and crisis management.

ISF said enterprises can use the standard and related tools to:

  • adopt new and emerging technologies more securely by managing associated risks
  • exploit business opportunities while reducing risk
  • improve resilience and competitiveness as the business environment evolves
  • increase confidence in the enterprise's ability to meet legal, regulatory and contractual obligations
  • manage major security incidents that can have a significant impact on the enterprise.

One widespread type of intellectual property is software theft. Global software theft totaled $63.4 billion last year, up from $58.8 billion in 2010. China made up $9 billion of that total last year versus a legal market of less than $3 billion, making it the global piracy rate leader at 77 percent.

A well-publicized example of industrial espionage conducted by a Chinese company against a U.S. company is the case of American Superconductor (AMSC), which makes computer systems for wind turbines.

Last year, AMSC discovered that its main customer for those systems, Chinese wind turbine maker Sinovel Wind Group, had stolen AMSC's proprietary source code and was using pirated copies of the control system software to run its turbines, according to a report by Bloomberg.

That discovery explained to AMSC CEO Daniel McGahn why orders from Sinovel, AMSC's main customer for the turbine control systems, had dropped off sharply in early 2011. At the time, Sinovel accounted for more than two-thirds of AMSC's revenue.

After investigating the theft, AMSC discovered that Sinovel paid one of AMSC's employees to provide the proprietary source code. McGahn decided to go after Sinovel in Chinese court, filing complaints against the company and seeking $1.2 billion in damages. The complaints are still pending.

AMSC's case is not unique. In fact, theft of U.S. intellectual property by Chinese companies is getting worse, not better. Peter Dent, a vice president at Electron Energy Corp., told an annual hearing on China's compliance with World Trade Organization (WTO) rules that both large and small U.S. companies face "persistent and increasingly complex cyber-attacks [from China] in an effort to steal intellectual property from company computer networks," according to a Reuters report.

The risk to U.S. firms from intellectual property theft, whether perpetrated abroad or right here at home, is on the rise. Companies should take steps to protect their networks or they will risk the loss of valuable assets and ultimately their livelihood.

For more:
- check out ISF's information security standard
- read BSA's latest software theft report
- see the Bloomberg article
- read the Reuters story

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