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Intellectual property protection do's and don'ts

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It's a cold day in late November. Two men are getting ready to board a plane bound for Southeast Asia at San Francisco International airport. In their luggage is millions of dollars worth of stolen trade secrets. These pilfered project designs, manuals, CDs, floppy diskettes and third-party licensed materials will allow nefarious foreign buyers to unlock the secrets of the most innovative U.S. companies, and aggressively compete with them on the open market. But just as the men are about to step onto the plane, they are arrested by a joint FBI/Computer Hacking and Intellectual Property (CHIP) investigative team.

It sounds like an episode of a television crime drama. Yet this actually happened in 2001, when two men tried to flee the country with trade secrets stolen from a few of the biggest names in Silicon Valley. In this case, the criminals were stopped in their tracks, but theft of trade secrets is a growing and evolving problem, says Matt Parrella, assistant U.S. attorney and chief of the San Jose branch of the U.S. Department of Justice's CHIP unit.

"It's growing in terms of the number and types of trade secret cases we're prosecuting," he says. "Three to five years ago we saw physical manuals being stolen, whereas today digital versions of schematics, data sheets, manufacturing processes and source code are at risk. And the number of complaints being filed and investigations pursued are dramatically on the rise."

According to a 2006 report

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from the office of the United States Trade Representative (USTR), U.S. businesses are losing approximately $250 billion annually from trade secret theft. Federal law enforcement officials say the most targeted industries include biotechnologies and pharmaceutical research, advanced materials, weapons systems not yet classified, communications and encryption technologies, nanotechnology and quantum computing.

What companies hear about in the media is "probably just the tip of the iceberg," says Randy Sabett, a partner at Sonnenschein Nath & Rosenthal in Washington, D.C., and a member of the firm's information security and intellectual property practice group. "There are probably a fair number of situations where people don't even realize their trade secrets have been stolen."

This was first published in May 2007

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