Trade Secrets: 2 Types of Thieves, 2 Types of Victims

American businesses are spending a significant amount of their time battling trade secret theft. In general, there are two kinds of trade secret theft, the kind done by employees and former employees, and the kind done by external institutions, often foreign governments or corporations.

The most common is the first kind, e.g. an executive leaves her company and takes client lists and other confidential information with her to her new employer. Sometimes the violation is unintentional and the executive was unaware the information was even considered a trade secret. Often, though, the theft was intentional and the executive and her new employer find themselves on the wrong end of a lawsuit.

This first kind of trade secret theft obviously isn’t ideal, and it can create huge losses for the companies whose information has been stolen. But this kind of theft is at least somewhat manageable.

The far more frightening and damaging kind of trade secret theft is the intentional hacking, often done from computer terminals half a world away. This is the trade secret theft that has American businesses—as well as our government institutions and military—on full alert.

To combat this pernicious threat, the Obama administration recently unveiled its “Strategy on Mitigating the Theft of U.S. Trade Secrets.” This strategy “includes diplomatic engagement with nations where incidents of trade secret theft are high, working with industries on the best ways to protect their secrets, and stepped up prosecutions of business espionage,” according to a report in USA Today.

U.S. Attorney General Eric Holder said that there are two kinds of companies affected by trade secret theft: “Those that know they’ve been compromised and those that don’t know it yet.”

And that’s not much of an exaggeration.

What’s so alarming is that, according to a recent report by the D.C.-based cybersecurity firm Mandiant, one of the chief alleged perpetrators of trade secret theft is a unit of the Chinese military, which Mandiant accused of cyberattacking more than 140 U.S. companies. The Chinese government denies involvement.

It’s good to see the Obama administration giving this issue the attention it deserves. Now, we just have to wait and see if the situation actually improves. I would never say “it can’t get any worse” because I don’t ever want to be accused of tempting fate. But the theft of trade secrets—particularly by other countries—has become a serious and ongoing concern for far too many American businesses.

Mr. Obama knows what’s at stake: national security, economic competitiveness and jobs.

It’s time for every American company—and their executives—to take this issue seriously.

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